Weekly Review: The war will soon be over! Russia and Ukraine challenge risk-averse bulls Gold did not stand firm and lost miserably "demon nickel" Will inflation return to the protagonist's aura?
24K99 - As the war between Russia and Ukraine approaches its third week, uncertainties continue to disrupt markets, and safe-haven assets such as gold and crude oil can be said to usher in a bullish spring. But with the Ukrainian president hinting that the war will soon end, and Russian President Vladimir Putin has also said that there is progress in the negotiations, the situation will be a heavy challenge to the risk-averse bulls next week. Gold failed to hold firm at the $2,000 threshold, and this week's gains are still lost to nickel, which is in more attention. Towards the end of the war, investors need to watch carefully whether inflation can regain its protagonist aura.
Political and geopolitical situation in Russia and Ukraine:
According to the latest Russian-Ukrainian war situation on the 12th, investors are most concerned about "when will the war end". According to foreign media such as Reuters, Putin said after meeting with Belarusian President Alexander Lukashenko at the Kremlin on Friday that there was some progress in the negotiations between Russia and Ukraine. "Our negotiators told me there was some positive shift and I'll talk about it later," he said. ”
Turning to Zelenskiy's speech, he said in his speech: "We have reached a strategic turning point, we are advancing towards the goal, toward victory, this is a patriotic war, a war against a stubborn enemy. Zelenskiy also said that the Continuous Bombardment of Many Ukrainian Cities by the Russian Army shows that the sanctions are not strong enough, and he expects allies to continue to offer sanctions, so that Russia will pay the price for launching ugly wars every day. He also encouraged the people to sow more seeds in the situation, and Ukraine, which was a large exporter of cereals and vegetable oils, was bound to be unable to maintain its original level in 2022.
In addition to the views expressed by the leaders of the two countries, in addition to the daily war situation update, investors also focused more on "whether Russia and Ukraine will launch a nuclear war". At present, some American experts have come forward to express their position, believing that the power of Russian President Putin has not been seriously threatened, and Russia's advantage on the battlefield has not been lost to Ukraine, so the nuclear threat is still a bluff.
Olga Oliker, director of the International Crisis Group's Europe and Central Asia program and an adjunct professor at The Johns Hopkins University's School of Advanced International Studies, noted that Russian leaders are unlikely to resort to the use of nuclear weapons, while warning NATO and the West not to escalate. "Putin's power is not seriously threatened, and Russia has not lost on the battlefield," she wrote. Despite a great deal of resistance in Ukraine, Russian troops continued to slowly advance the main cities of Ukraine, which retained enormous conventional combat effectiveness. ”
Artur Kacprzyk, a researcher on nuclear deterrence, arms control and NATO at the Polish Institute of International Affairs, offers his own view that Putin's nuclear attack on NATO-supplied weapons is "unrealistic."
While many experts have issued varying degrees of warnings at different points in time, Kaprzyk said Russia is unlikely to launch a nuclear attack at this time. His overview of the situation said Putin's threat "received a cautious response from NATO's nuclear-weapon states and did not prevent the delivery of weapons to Ukraine or the imposition of sanctions on Russia".
In terms of Sanctions by Western countries, the most important news is that Russia has been kicked out of most-favored-nation status. Before President Joe Biden left for Pennsylvania, he announced at the White House the revocation of Russia's most-favored-nation (MFN), or "Permanent Normal Trade Relations" (PNTR) status. "MFN status means that the two countries agree to trade under the best possible conditions, i.e. low tariffs, few trade barriers and imports," he explained. The revocation of Russia's permanent normal trade relations will make it more difficult for Russia to trade with other countries that have acted like the United States, and it will once again deal a heavy blow to the Russian economy, which has been hit hard by sanctions. ”
U.S. Trade Representative Katherine Tai immediately said through a statement that the action on the 11th would eliminate the most-favored-nation treatment for Russia and deprive Russia of the benefits of joining the World Trade Organization (WTO). Putin and his administration will have to pay a heavy economic and diplomatic price for invading Ukraine, and the United States will work with other WTO members to further isolate Russia in multilateral institutions.
After Russia loses the most-favored-nation treatment granted by the United States, Russian companies will be listed as similar to Cuban and North Korean enterprises, and the United States can significantly increase tariffs. The measure still needs to be approved by the U.S. Congress, but U.S. lawmakers from both parties share a vendetta against Russia's invasion of Ukraine and are expected to pass soon.
Key economic data and central bank dynamics:
The U.S. reported a consumer price index (CPI) rising 7.9 percent year-over-year on Thursday, beating market expectations and its biggest gain in nearly 40 years. The market believes that inflation will accelerate further in the coming months as commodity prices are pushed up by the Russo-Ukrainian war. In terms of Russian-Ukrainian talks, the foreign ministers of Russia and Ukraine held talks in Turkey on Thursday and failed to reach an agreement on a ceasefire and humanitarian corridor.
The European Central Bank (ECB) decided on Thursday that the three major interest rates would not hold, but announced an early exit from quantitative easing (QE). ECB President Christine Lagarde said at the meeting that Russia's invasion of Ukraine had had a "negative impact" on the eurozone economy.
The Fed will meet next week, Wolfpack Capital Investment Chief Jeff Wright mentioned that U.S. inflation has clearly not peaked, Fed Chairman Powell endorsed last week's 25 basis point March rate hike has been fully digested by the market, if the Fed does not raise interest rates, it will represent the U.S. economic slowdown is far more serious than officials think, will put the market into panic.
The U.S. consumer confidence index fell sharply at 59.7 in March at 59.7 in March, while consumers' inflation expectations for the year ahead rose to their highest level since 1981, rising from 4.9 percent in February to 5.4 percent.
Also noteworthy about the economic outlook is Goldman Sachs' decision to revise down its 2022 gross domestic production (GDP) growth rate estimate from 3.1% in October 2021 to 2.9%, predicting that the economy has a 35% chance of falling into recession.
Precious Metals Market:
Observing this week's trend, among precious metal assets, big brother gold's gains have outperformed nickel. After the London nickel futures surged by nearly 250% in two trading days, the London Metal Exchange (LME) urgently suspended trading and announced that it would not resume trading before March 11, causing high discussion and focus in the market.
Nickel, a non-ferrous metal, is widely used in the production of stainless steel and new energy vehicle power batteries, and the data shows that Russia is a large producer of nickel, supplying about 6% of the world's nickel metal. More than 70% of the world's nickel is used to make stainless steel, and another 7% is in the field of electric vehicle batteries.
According to the U.S. Geological Survey, Russian nickel ore production will be 250,000 tons in 2021, accounting for 9.3% of the total global production. With the increase of sanctions against Russia, many countries have begun to restrict and review the passage of ships carrying Russian-related cargo through ports, and the trading and transportation of Russian nickel have been hindered and delayed. Driven by Russian supply doubts and short-selling, nickel prices have soared.
Just on March 8, the price increase of LME nickel futures expanded to 100%, breaking through the $100,000 per ton mark, and the cumulative increase of 248% in two trading days refreshed the LME record.
Georgette Boele, a precious metals strategist at ABN AMRO, said in a report that the Russian-Ukrainian conflict has greatly increased market uncertainty, and although price volatility is still large, it is expected that the gold price will remain at the level of $2,000 per ounce in the next 2 years.
Boele went on to add that the Russian invasion of Ukraine has heightened market uncertainty, with investors holding gold not only for safe haven, but possibly even as a unit for trading. Investors, fearful of inflation, war and currency depreciation, prefer physical gold over gold-backed ETFs. Holdings in ETFs have increased recently, but not enough to support a sharp rise in gold prices.
Gold briefly hit an all-time high of $2,078.80 an ounce this week, though it has recently pulled back from its highs and is now below $2,000 an ounce.
Boele, who expects gold to remain high over the next 2 years, also raised his forecast for the gold market, expecting it to remain around $2,000 an ounce by the end of 2022. Boele said the war between Russia and Ukraine is causing chaos in the global economy, and economic sanctions against Russia will further damage the supply chains of many important commodities around the world, including energy, agricultural and industrial metals.
"We expect inflation to spike further, putting pressure on consumer confidence and spending. We think economic growth will slow somewhat. We expect gold prices to be supported in the current environment, but at the same time there will be a lot of volatility in prices. Boele said.
However, Boele also said that the gold market will also face some negative factors, mainly from the Fed's interest rate hikes. The market expects the federal funds rate to rise to at least 2.25% by the end of 2022, an environment that will support a stronger dollar and put pressure on gold prices.
Crude Oil Market:
In addition to precious metals, crude oil can be said to be the focus of this week's topic, "whether it can jump to the $200 price" has become a market view chased by investors. Crude oil futures prices rose on the 11th, but closed lower this week, mainly as traders assessed the potential efforts of countries to fill the gap in the Russian oil global market. The oil market has been volatile this week as the United States began banning imports of Russian crude oil, prompting Western countries to follow suit, threatening to leave a huge void in the global supply-demand balance.
But Troy Vincent, senior market analyst at DTN, said: "The unilateral ban on Russian oil imports means that Russian crude oil that has been sold to US buyers can find another buyer in the global market, which will keep the global supply and demand balance basically unchanged, and also allow US buyers to buy crude oil anywhere."
But if more and more countries ban Russian oil, global production outside Russia alone will not be enough to cope with rapidly growing demand. At the same time, Biden will work with Congress to legislate to revoke Russia's trade status, and the European Union and the Group of Seven (G7) will join the move.
Carsten Fritsch, a commodities analyst at Commerzbank, said Russian President Vladimir Putin said on Wednesday that Russia would continue to meet its export commitments and ease market fears that Moscow would close exports in retaliation for Western financial sanctions, putting crude oil prices slightly under pressure.
In addition, the analyst also pointed out that the ambassador of the United Arab Emirates (U.A.E) to the United States stated on Twitter that he agreed and encouraged the Organization of the Petroleum Exporting Countries (OPEC) to expand production increases, which is also one of the factors that depress the price of crude oil. Although the U.A.E. Energy Minister subsequently contradicted the ambassador, saying U.A.E was committed to the OPEC+ agreement and its existing monthly production adjustment mechanism.
Fritsch mentioned that the latest EIA forecast shows that U.S. oil producers are currently trying to increase production, which seems to be reacting to rising oil prices, and that the IEA is willing to release more emergency oil reserves if necessary. However, Iran's nuclear talks took place in Vienna on Friday but were suspended without a deal, providing crude oil with upward momentum.
Forex & Crypto Markets:
The dollar index strengthened on the 11th, rising for the fifth consecutive week, the yen depreciated to 117.2, a new five-year low, after Putin hinted that the Russian-Ukrainian talks made progress, the Australian dollar, the New Zealand dollar and other commodity currencies weakened. Among them, the DOLLAR/JPY climbed to a five-year high, rising nearly 1% to 117.29 yen.
Edward Moya, senior analyst at Oanda, said: "The U.S. economy looks to perform well when one looks at which economies are ready to deal with broad inflationary pressures, which is why USDJPY performs well at a time of risk aversion. ”
The U.S. dollar is also supported by expectations that the Fed will raise interest rates next week, while the Bank of Japan (BOJ), which also holds a monetary policy meeting next week, is expected to continue to maintain accommodative monetary policy. The euro fell 0.66% against the dollar to $1.0910, a 0.4% weekly decline, marking a record for six consecutive weeks of blackening. The euro fell more than 2.5% against the dollar in March.
The pound fell 0.37% against the dollar to $1.3035, and the Office for National Statistics (ONS) reported a monthly increase of 0.8% in gross domestic production (GDP) in January, the best since June and better than the market estimate. Commodity currencies, including audible and new zealand dollars, weakened, with the AUDUSD depreciating 0.97% to US$0.7286 and the NZD depreciating 0.86% to US$0.6803.
Juan Perez, head of trading at Tempus Inc., said the currency, which rose as commodity markets tumbled into chaos, began to cool down due to optimism about the Russia-Ukraine negotiations and the possibility of a ceasefire, which helped boost global growth momentum again. The Russian ruble rose 3.7 percent against the dollar to 114.2 rubles per dollar, down 8 percent this week and down more than 30 percent over the past three weeks.
Bitcoin quickly recovered $39,000 in the morning of the 12th, re-showing the bullish market of US President Biden signing a crypto executive order. On the other hand, on the situation of the war between Russia and Ukraine, Russian President Putin hinted that there has been new progress in the negotiations, prompting the current situation to ease and reverse. However, investors in the crypto market must still be cautious, as regulatory bears cannot be ignored.
Looking back over the past month, the prices of speculative assets such as stocks, cryptocurrencies and commodities have fluctuated significantly, indicating a high degree of uncertainty among investors. Bitcoin rose 7 percent on the London trading day after Russian President Vladimir Putin said there was "positive progress" in the talks. Coming to the morning market of the 12th Asian market, Bitcoin reported at $39,200.26, regaining the $39,000 threshold.
This week's currency circle is most concerned about Biden's signing of the crypto executive order, in fact, the crypto industry is generally optimistic, especially the previous Treasury Department accidentally exposed the content of the executive order in advance after the deletion, it seems to have contributed to the market upward momentum. However, there are still several influential people in the crypto market who are not optimistic, believing that the entire order is cliché and focusing on central bank digital currencies (CBDCs) rather than the crypto space.
Circle CEO Jeremy Allaire noted that the U.S. appears to have accepted digital assets as one of the most important technologies of the 21st century, and in the orders repeatedly call on relevant federal agencies to understand policy stances to support new ventures and the competitiveness of the U.S. economy. He concluded: "This is a watershed for cryptocurrencies, digital assets, and Web 3.0, similar to the 1996/1997 government awareness of the importance of the Internet (the Internet)." ”
U.S. Stock Market:
The main index of the US stock market rose in early trading on the 11th, but after the United States, the European Union and the Group of Seven (G7) offered a new round of sanctions against Russia, senior Ukrainian diplomats said that they did not see progress in the negotiations, the market risk sentiment deteriorated, the US stock market turned down intraday, the decline in the tail was further expanded, the S&P final closed 1.3%, the weekly decline reached 2.9%, the worst weekly performance since January 21, and also went lower for the second consecutive week.
As of the close in New York on the 11th, the Dow Jones index fell 229.88 points or 0.69% to close at 32944.19 points; the Nasdaq index fell 286.15 points or 2.18% to close at 12843.81 points; the S&P 500 index fell 55.21 points or 1.3% to close at 4204.31 points; and the Philadelphia Semiconductor Index fell 66.9 points or 2.08% to close at 3144.1 points.
Ryan Detrick, an analyst at LPL Financial, said: "Equities are heading for another black week as hopes of a ceasefire are left with only disappointment, which increases uncertainty. ”
Peter Tuz, president of Chase Investment Counsel, mentioned that regarding the development of the crisis in Ukraine, people just don't know the future situation, so there is no reason to take a risky attitude towards the weekend.
Joseph Amato, chief investment officer of Neuberger Berman Group LLC shares, said: "Everyone is in a state of tension, if the Ukrainian crisis eases, the market is ready to rebound, but if the situation worsens, the market may also be more volatile and fall further." ”
Timeline of important economic data for next week:
Monday 03/14
No important economic data
Tuesday 03/15
China's Industrial Value Added above Designated Size in February (ym)
The UNEMPLOYMENT RATE IN THE UNITED KINGDOM FOR THREE MONTHS TO JANUARY
UK unemployment rate in February
France Consumer Price Index (MTH) for February
Germany's ZEW Economic Sentiment Index for March
United States Producer Price Index for February (yoy)
Financial Events:
The New Office of the State Council of China held a press conference on the operation of the national economy
Austria OPEC publishes its monthly crude oil market report
Central Bank News:
The RBA publishes minutes of the monetary policy meeting
Wednesday 03/16
US API crude oil inventories change last week (10,000 barrels) (to 0311)
Canada Consumer Price Index for February (yoY)
Canada Core CPI for February - Commonly Used Index (yoy)
U.S. Retail Sales for February (MoM)
US NAHB house price index for March
U.S. EIA crude oil inventories change last week (10,000 barrels) (to 0311)
China's National Bureau of Statistics released a monthly report on residential sales prices in 70 large and medium-sized cities
The French IEA publishes its monthly crude oil market report
Thursday 03/17
U.S. Federal Funds Benchmark Rate
Australia's seasonally adjusted unemployment rate in February
Eurozone Consumer Price Index Final February (moM)
Eurozone Consumer Price Index Final For February (ytd)
UK official bank interest rate
U.S. Quarter-Adjusted Initial Jobless Claims Last Week (1,000) (to 0312)
U.S. Housing Starts in February (Annualized Mth)
The Federal Reserve announces its interest rate decision
Fed Chairman Jerome Powell held a monetary policy press conference
ECB President Lagarde delivered a speech
Friday 03/18
Japan National Consumer Price Index for February (yoY)
Japan unsecured overnight call rates
Eurozone Trade Balance after Quarterly Adjustment for January (EUR bn)
Canada Retail Sales in January (MoM)
U.S. NAR Seasonally Adjusted Home Sales in February (Annualized MoM)
The Bank of Japan announces its interest rate decision
Bank of Japan Governor Toshihiko Kuroda held a monetary policy press conference