MILANO – After the strong rebound on the eve of the eve, European markets are expected to get off to a weak start: the investors’ lights are on Frankfurt where the Governing Council of the European Central Bank meets. Attention also to the new data on US inflation, arriving in the early afternoon.
The ECB’s dilemma
A complex moment for Christine Lagarde, who must keep together on the one hand the exit path from the extraordinary stimuli outlined to face the galloping inflation and on the other the crisis in Ukraine that will have an impact on the growth of Europe, not to mention the tensions which is unleashing on raw materials and therefore the new wave of price increases which has the attack on Kiev as its epicenter.
Maintain “optionality” as much as possible by Lagarde is the suggestion that often recurs in the reports of investment banks: it means leaving all doors open, maintaining a flexible attitude while awaiting events (Philip Lane, remember from La Francaise AM, clearly stated that “the ECB will not have a definitive answer on the impact of the war this week “). On the other hand, an upward revision of inflation estimates and downward growth on growth is certain.” The updated macroeconomic projections – Generali Investments forecast, for example – will show a strong shift in inflation expected for 2022 (from 3.2% to the range 5.5% – 6% in our opinion), while the corresponding growth expectations will have to be revised (from 4.2% to at least around 3% to our opinion) “. All while the inflation forecasts discounted by the market” both in the medium and long term broke away from the 2% threshold. The Board of Directors is therefore moving more and more towards a situation that Panetta has defined as “bad inflation”, that is, an unanchoring of inflation expectations “.
According to analysts, Lagarde should postpone any final decision on the closure of Quantitative easing, the stock purchase program: “The uncertainty is so high that there is no reason why the ECB is firmly committed to doing anything”, said Frederik Ducrozet of Pictet wealth management al Ft. The risk of stagflation (low growth and high inflation) is around the corner. “Net purchases of bonds under the PEPP (the anti-pandemic program) may be suspended next month as planned and a schedule for the end of net purchases under the APP (quantitative easing” normal “). As labor market pressures on core inflation remain subdued, the ECB he is not in a hurry to raise rates yet. We do not expect the first rate hike before December, consistent with the developments in the conflict, “said Sylvain Broyer, chief economist for Europe at S&P. Bloomberg Economics also holds the roadmap to stop buying in the final quarter of the year. year and an initial increase in the cost of borrowing of 25 basis points in December.
Uncertain markets, Tokyo recovers the rally
The futures of the European stock exchanges are down, after yesterday’s crackling session and in view of the ECB meeting. Those on the Eurostoxx 50 yield 0.32% while those on the Dax 0.23%. Futures on London’s Ftse100, on the other hand, are up and up 0.36%. The stock market, however, analysts point out, is characterized by strong volatility these days. In addition to the ECB and US data, we look to Turkey where there are Ukrainian Foreign Minister Dmytro Kuleba and Russian Sergei Lavrov, who will meet today in Antalya. This is the first time that Moscow has sent a minister for talks on the crisis.
In the morning the Tokyo Stock Exchange it marked the largest daily rise (+ 3.94%) since December 2020, taking its cue from the recovery of the US stock indices. Last night, in fact, Wall Street it closed strong with the Nasdaq gaining 3.59% and the Dow rising 2%.
Eyes always focused on the energy sector. The Petroleum raises his head slightly after the sharp drops recorded yesterday after OPEC opened to an increase in supply and the IEA hinted that it could draw on strategic reserves again. Yesterday, the WTI closed the Nymex at $ 108.7 a barrel, while Brent was back by 13% – the largest percentage drop since April 2020 – to $ 111 a barrel. Prices hit session lows after the Financial Times wrote that Yousef al-Otaiba, the UAE ambassador to Washington, said the country was in favor of an increase in production. This morning on electronic circuits, the American WTI barrel changed hands at 109.02, an increase of 0.29% while the Brent barrel advanced to 112.52, an increase of 1.24%.
In the currency, theeuro on the dollar, trading at $ 1.1057, after jumping 1.6% yesterday, its best session since June 2016, and after the common currency hit a 22-month low of $ 1 in recent days. On the yen, the single currency is stable at 128.30. Dollar / yen at 116.02.