Week in a Glance: War, Inflation and the Fed, Retail Sales

Last week, the information tension around Russia and Ukraine reached its local peak, since February 16 was the date the US announced the start of the war. Despite the fact that the date has passed without any excesses, the shadow of the war has tightly covered the financial markets and is not thinking of retreating yet.

Perhaps the two main indicators of the level of information tension are the dynamics of oil and gold prices. With oil, everything is clear, since 10+ million barrels per day of production are at stake. And gold finally remembered that it is an eternal safe-haven asset, and the demand for it has been increased all week.

So if anyone believes in the markets and their ability to respond as sensitively and quickly as possible to the slightest changes in the information field, then here's what you need to look at in order to understand when it will be possible to breathe a sigh of relief. Oil will fall and gold will begin to decline, which means the worst is behind us. But, unfortunately, we start the week at close to maximum levels for both assets.

As for the stock market, it still should not be used as a pure indicator. Yes, it is also under downward pressure. But it still has its own separate story in the form of a change in the vector of monetary policy in the United States. And last week, the markets received a number of signals in favor of the fact that the tightening promises to be quite aggressive and very soon.

Both the minutes of the last FOMC meeting and data on manufacturing inflation in the US spoke in favor of this. Considering that in other countries, for example, in the UK, the situation is no better (inflation is at its highest levels over the past 30-40 years), as in Canada, the downward pressure on the US stock market can be explained not only by geopolitical risks.

At the same time, we note that positive news and an optimistic mood are not in the price now. Retail sales in the US showed solid growth, which turned out to be much higher than expected. But, judging by the reaction of the markets, it was of little interest to anyone. As is the reporting season, which is coming to an end in the US.

The upcoming week is unlikely to change pessimism to optimism. The shadow of war, judging by Biden's latest comments, is only getting denser so far. But every day without a fight increases the chances that it will remain informational.

In terms of the economy, this week we are waiting for the decision of the Central Bank of New Zealand, which is expected to raise the rate again. And if the comments are aggressive enough, the New Zealand dollar will very likely be in high demand in the foreign exchange market. In addition, there will be a host of less important macroeconomic statistics such as PMIs in Europe or data on personal income and spending in the US.