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) Marketmind: Collateral Damage | An American news network

Caroline Bleakley

USTimeToday is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – The content will be deleted within 24 hours.

Related Articles

Back to top button