Last week, the international market changed, the escalation of the situation in Ukraine triggered fluctuations in risky assets, and the key inflation index of the United States hit a new high in nearly 40 years.
US stocks were mixed, with the Dow down 0.1%, the NASDAQ up 1.1% and the S & P 500 up 0.8%. The three major stock indexes in Europe are under pressure. The FTSE 100 index in the UK fell 0.1%, the DAX 30 index in Germany fell 3.1% and the CAC 40 index in France fell 2.6%.
There are many highlights this week, and geopolitical factors remain the focus. U.S. President Joe Biden will deliver a state of the Union address. Federal Reserve Chairman Powell will attend a congressional hearing to testify on the semi annual monetary policy report. The United States will release the February non farm employment report or set the tone for raising interest rates next month. Several central banks will hold interest rate meetings. Canada may raise interest rates by 25 basis points, and Australia and Malaysia are expected to stand still. OPEC + held a monthly ministerial meeting and continued to release 400000 barrels / day. There is little suspense.
rating agencies downgraded the credit rating of Russia and Ukraine
With the escalation of the situation in Ukraine, western countries have launched several rounds of sanctions against Russia. On the 26th, the United States, the European Union, the United Kingdom and Canada issued a joint statement banning several Russian banks from using the global Interbank Financial Telecommunications Association (Swift) international settlement system.
Moody's, a rating agency, said on the 25th that it had included the credit ratings of Russia and Ukraine in the review list of possible downgrades. In the case of Russia, this means that the rating will slide to speculative or junk. Russia currently has baa3 rating, which is the lowest level of Moody's investment grade. Ukraine has a B3 rating, which is the middle level of non investment grade. Moody's said that the escalation of the situation in Ukraine represents "a further significant increase in geopolitical risks. At the same time, it has implemented more and tougher sanctions against Russia, or will include sanctions that may affect the repayment of sovereign debt".
Moody's said that a more comprehensive assessment of the impact of sanctions will depend on the scope of sanctions, targeted departments and the degree of coordination between western countries. Moody's said that for Ukraine, "widespread conflict" would pose a liquidity risk because the country would have "considerable" debt maturities in the next few years and its economy depended on foreign exchange funds.
On the same day, S & P downgraded Russia's sovereign credit rating from BBB - to BB +, lower than investment grade, and warned that it might further downgrade due to the "strong" sanctions imposed by the international community on the country, and the agency also downgraded Ukraine's long-term credit rating from B to B -.
Maria shagina, a visiting researcher at the Finnish Institute of international affairs, wrote in a paper published at the Carnegie Moscow Center last year: "cutting off swift will terminate almost all international transactions, trigger currency fluctuations and lead to large capital outflows."
Powell appears in Congress
US President Joe Biden will deliver a state of the Union address on Tuesday. The Democratic Party said it would discuss inflation and the economy. At that time, Biden will emphasize his efforts to curb inflation and highlight the challenges faced by the government in the economy and covid-19 epidemic. Combined with the current situation in Ukraine, the latest statements on relevant topics will also become the focus.
Federal Reserve Chairman Powell will attend a congressional hearing to testify on the semi annual monetary policy report. In his speech released in advance, Powell said that he would be committed to achieving the Fed's monetary policy objectives, namely maximum employment and price stability, and reiterated that it would be appropriate to raise interest rates soon. The U.S. economic slowdown caused by problems such as the Omicron mutation strain should be temporary.
This week, the Federal Reserve will release the beige book on economic conditions. With the improvement of the epidemic situation, the statements about inflation and employment deserve attention. In addition, many Fed officials, including New York Fed chairman Williams, will continue to appear and make speeches. You can pay attention to the latest statements on the policy path.
In terms of data, the biggest focus is the February non-agricultural employment report. At present, the market is expected to create 400000 new jobs, and the recovery of the employment market is advancing steadily. With the return of the labor force to the market, the unemployment rate is expected to fall by 0.1 percentage point to 3.9%. In addition, the performance of ISM manufacturing index, non manufacturing index and the number of initial jobless claims in February will also measure the performance of U.S. economic momentum during the peak of the epidemic.
The earnings season is drawing to a close. The key enterprise reports announcing the results this week include retailers Costco, Kroger, target, Nordstrom, star technology stocks zoom, salesforce, snowflake, Broadcom, etc.
crude oil and gold
International oil prices fell after briefly breaking the $100 mark last week, and the market continued to assess the impact of the situation in Ukraine on energy supply and demand. WTI crude oil contract in recent months closed at US $91.59 per barrel, up 1.5% in the week, while Brent crude oil contract in recent months closed at US $97.93 per barrel, up 4.7% in the week.
Carsten Fritsch, commodity analyst at Commerzbank, said in a report: "The question now is how Russia will respond to the sanctions that have been decided, which will have the worst impact on the banking and technology industries. If Russia responds by reducing energy transportation, prices may rise sharply again, which will also shift the focus of the United States to Iran."
Saeed khatibzadeh, a spokesman for Iran's foreign ministry, said last week that "significant progress" had been made in the resumption of negotiations on Iran's 2015 nuclear agreement, but there were still some key issues to be resolved. Frich predicted that if the United States lifted sanctions against Iran, Iran would be able to put an additional 1.5 million to 2 million barrels of crude oil on the market every day.
International gold prices weakened in late trading, and the news of Russia Ukraine negotiations boosted risk appetite and reduced the market's demand for safe haven gold. COMEX gold futures for April delivery on the New York Mercantile Exchange closed at US $188760 an ounce, down 0.6% for the week, recording a negative line for the first time in four weeks.
ChinTan karnani, research director of insignia consultants, said that part of the reason for the withdrawal of gold prices was that funds chose profit taking after they could not exceed $2000. In addition, the recently released better than expected U.S. economic data also calmed market concerns, and the potential interest rate increase path of the Federal Reserve was not significantly impacted.
European inflation or further acceleration
The Ukrainian issue is a huge challenge facing the EU. Europe issued several rounds of sanctions against Russia last week. The German government will stop the approval process of "beixi-2" natural gas pipeline project. German Chancellor Scholtz asked the country's Ministry of economy to withdraw the necessary supply safety report in the process of pipeline certification.
This week, the euro zone announced the CPI in February. The market is highly concerned about inflation and how the central bank will respond. Although the base effect has improved, it was previously announced that the eurozone CPI rose to a record 5.1% in January, and the overall inflation rate in some Baltic countries has been higher than 10%.
As energy prices remain high, tensions on the border between Ukraine and Russia have intensified, and inflationary pressures are difficult to resolve in the short term, the market expects CPI to accelerate to 5.3% in February. Some members of the policy committee of the European Central Bank have called for an end to asset purchases this year and an increase in interest rates as soon as the fourth quarter.
In February, the PMI of European countries will also be released. As countries gradually relax epidemic control, the service industry index is expected to be slightly revised up. However, the manufacturing industry is still subject to supply chain bottlenecks. In addition, soaring electricity prices in Europe also put great pressure on enterprise production.
Mann and Sanders, members of the Bank of England's policy committee, will deliver speeches this week, or provide a clear signal for the interest rate hike in March. Inflationary pressure is posing a threat to British consumers. Data show that British consumer confidence fell to the lowest level since January 2021 in February, and Britons' expectations for the next 12 months have deteriorated sharply after the increase of price pressure. Joe staton, director of customer strategy at GfK, pointed out that concerns about the impact of rising food, fuel and utility prices, tax increases and rising interest rates triggered a perfect storm of concern and shook consumer confidence.
highlights of this week
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