Week in a Glance: Inflation and Rates, Oil & Earnings Season

Last week was remembered first of all by the inflation statistics from the USA. No joke, 7.5% growth in consumer prices. This has not happened since the early 1980s. Actually, after such figures, it became completely clear to everyone that inflation would not disappear by itself and strong antipyretic drugs were needed. This, of course, is about raising rates by the Fed.

No one is talking about the start of the increase in May or June, as it was a couple of months ago. The question on the agenda is not “will the Fed raise rates in March?” but “by how much will the Fed raise rates in March?”. And judging by the latest projections, 0.25% is no longer an option. Minimum 0.5%. Not surprisingly, the US stock market failed at the end of last week.

Note that, given the current development of events, this decline is only the beginning of the movement, and not the end.
Yes, the reporting season helps and keeps the ranks of buyers from falling apart completely, but there will be less unity as the quarterly data period ends and as the X hour in March approaches.

The lion's share of the rise in inflation is accounted for by rising energy prices. And the markets pay surprisingly little attention to this moment. After all, it is obvious that in order to combat such a serious inflation, it is necessary to use all available methods, including, for example, reducing pressure on the energy asset market. At the end of last year, the US has already made efforts in the form of a coordinated attack on the oil market in the form of interventions. But this, obviously, was not enough. The next ace up the US sleeve is Iran. There is a feeling that there will be a nuclear deal and oil supply may increase by 1-2 million barrels per day, at least in the short term. But the markets are somehow not at all worried about this, but in vain.

The coming week will be rich in macroeconomic statistics: retail sales in the world's leading economies, plus inflation in the US, China, the UK and Canada, as well as the GDP of the Eurozone are unlikely to relax.