The publication of the FOMC minutes last week revealed that the central bank is determined to raise interest rates to fight inflation and that it may do so faster than previously expected. Some Fed policymakers are also pushing for a faster balance sheet reduction, which – if confirmed – may contribute to a further tightening of financial conditions. On that note, a major investment bank was the first to project a recession as a result of the upcoming rate hiking cycle.1
Additionally, public markets have been roiled by the ramping up of sanctions against Russia over alleged war crimes committed in Ukraine, with Europe banning Russian coal imports.
The week ahead will see the release of key inflation data – CPI and PPI – that is likely to give us further clues about upcoming monetary policy decisions. Additional market-relevant releases are March retail sales – usually a gauge of consumer sentiment – on the 14th, and manufacturing and industrial production data – which may give investors a sense of how supply chains are holding up – on the 15th.
Invest in Crypto Today
Crypto assets were under extreme pressure earlier this past week as Vietnamese gaming company Sky Mavis suffered a major hack. But the appeal of crypto assets’ – appeared to be unscathed, as Binance.US managed to raise over USD 200 million in its first external funding round, at a pre-money valuation of USD 4.5 billion as it builds out a roadmap for an initial public offering.
Yieldstreet has been active in the space for some time. This past week, it launched a crypto offering through a third-party fund, with the goal of providing exposure to a basket of cryptocurrencies.
Additional sanctions have been imposed on Russia by the United States, Europe, and Japan after the discovery of potential war crimes in several northern Ukraine towns previously occupied by Russian forces. These new restrictions target Russia’s coal exports to Europe – though oil and gas have been left out for the time being – as well as targeting several other individuals including President Vladimir Putin’s daughters.
While not necessarily a sign of further escalation – Russian coal exports to Europe are limited in market value – these new sanctions tamed hopes of a negotiated peace in the near term and appeared to be reminding investors – who had been hopeful of some progress in the talks between the two sides – that the Russia-Ukraine war is likely to drag on.
The secondary effects of the war have not yet been factored into economic data. Policymakers in the US and Europe – and at the IMF – are currently trying to gauge the conflict’s impact on global growth, inflation, supply chains, commodity prices, and geopolitical risk in the medium term.
1 For additional color: With the US economy facing its tightest labor market in postwar history, we see a narrowing path for the Fed to deliver a soft landing. Indeed, while on the surface the US labor market still looks a touch looser than just before the pandemic, even after Friday’s strong jobs report, we think standard measures seriously understate the current level of labor market tightness because they don’t include open positions, which are arguably as, if not more, important than employed workers in gauging capacity utilization. – Goldman Sachs, What’s Top of Mind in Macro Research: Soft landing, commodities upside, higher G10 yields
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