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Marketmind: Collateral Damage | An American news network

Gasoline drips from the nozzle of a fuel pump at a gas station of the Brazilian oil company Petrobras in Brasilia
Gasoline drips from the nozzle of a fuel pump at a gas station of Brazilian oil company Petrobras in Brasilia, Brazil March 7, 2022. REUTERS/Adriano Machado

March 8, 2022

A glimpse of the day ahead at the Sujata Rao markets

All problems pale in comparison to the tragedy of Ukrainians fleeing bombed cities.

Others see a different kind of damage – from near-worthless Russian securities on investors’ books to rising commodity prices that will make consumers’ food and energy bills visible everywhere.

And the domino effects are still spreading.

After the S&P 500’s worst day since October 2020, equity markets showed no sign of recovery on Tuesday, with Wall Street futures down another 1% and Europe lagging. Since mid-February, European banks have lost a quarter of their share value and a drop in earnings seems inevitable

The next step under consideration – a ban on Russian energy imports – could make matters worse; Capital Economics expects Brent (currently around $120) to rise to $160 a barrel from currently around $215 a barrel and European natural gas to €300 a megawatt-hour.

Europe and a number of emerging countries would slide into recession.

Europe is resisting this ban, but it hasn’t stopped Brent from surging another $4 a barrel. Meanwhile, the green transition is becoming increasingly costly – from aluminum and steel used in wind turbines to nickel, a crucial component in electric vehicle batteries, prices continue to rise.

Supply chain disruptions are estimated to have pushed average transaction prices for new vehicles in the United States nearly a fifth above last year’s levels. The hit could be bigger in the coming year, and even more so in Europe – almost half of Germany’s nickel is sourced from Russia.

Rapid events and daily jumps in commodity prices make economic data stale. Still, they’re useful for anticipating what might come next; Oil import costs triggered Japan’s largest current account deficit since 2014, data showed.

The US February CPI, due Thursday, is expected to be up 7.9%y/y, but as last week saw the fastest gasoline price rise in 17 years, March prints could eclipse that.

As a result, the central banks are faced with the dilemma of growth and inflation. In the eurozone, where policy options are arguably the most limited, two-year German breakevens, a future measure of inflation, have risen above 5%.

commodity prices

Key developments that should give markets more direction on Tuesday:

– BOJ’s Kuroda rules out policy tightening to counter cost inflation

-German industrial production increases in January

-US trade balance/stock levels

-Poland central bank meets.

(Reporting by Sujata Rao; Editing by Dhara Ranasinghe)

https://www.oann.com/marketmind-collateral-damage/?utm_source=rss&utm_medium=rss&utm_campaign=marketmind-collateral-damage Marketmind: Collateral Damage | An American news network

Caroline Bleakley

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