Macroeconomics: The Day Ahead for 21 March

  The new week sadly begins with the war in Ukraine becoming ever more entrenched, and Russia’s willingness to commit atrocities against Ukraine’s civilian population by carpet bombing major Ukrainian cities ever larger, along with its Stalinesque purge of anyone opposing the war at home, while it also forcibly sends any Ukrainians opposing its occupation of some towns to gulags in Russia. Meanwhile Russia continues to pay nothing more than lip service to any diplomatic efforts to at least achieve a cease fire, with the Russian Ambassador to Bosnia even threatening to repeat the aggression Russia unleashed against Ukraine on Bosnia and Herzegovina if the country joins NATO. Ominously he added in an interview: “How do you know we’re not planning anything against Croatia, Hungary, or Poland? We have plans against NATO. We assess the geostrategic situation, we look where the threats are coming from and we react.” Russia’s initial military strategy may have failed, but the threats that this presents are ostensibly becoming ever larger, and the idea of Russia reintegrating back into global supply chains after hostilities stop, ever more distant, with obviously profound implications for energy, food and raw materials prices and supplies.

  Against this backdrop, the week’s modest run of hard statistics will be summarily dismissed, which includes Monday’s German PPI, Wednesday’s run of UK inflation indicators (CPI seen at 5.9% y/y from 5.5%, paced by food, energy and goods prices), US Durable Goods, New and Pending Home Sales. The run of surveys, which includes G7 ‘flash’ PMIs and Germany’s Ifo may get rather more attention, though the scale of any falls will clearly be magnified by very understandable emotions, rather than offering an accurate reflection of disruption to business activity due to the war in Ukraine; estimates see sharper falls of between 2 and 4 pts for Germany (Ifo Expectations seen at 92.0 vs prior 99.2), 1-2 pts for France and UK, and <1.0 pt in the US, though risks in Europe look to be to the downside.

  It will be another very busy week for G7 central bank speakers with Powell speaking at the NABE Conference, while others speak at the annual Bundesbank/ECB/FRB Chicago conference and BIS Innovation Summit. In Europe Switzerland’s SNB is very unsurprisingly seen holding rates at -0.75%, but up it rhetoric on the strength of the CHF, though for markets it will be a case of how much intervention actually undertakes to stem CHF safe haven strength that will be in focus. China’s PBoC is expected to hold the key 1 and 5-yr Prime Lending Rates at 4.7 and 4.6% respectively, premised on the unchanged rate on last week’s 1-yr MTLF operation; a modest 5/10 bps cut to the 1-yr rate is likely in Q2, following last week’s clear signal of additional fiscal and monetary support for the economy. Norges Bank is expected to hike rates by 25 bps to 0.75% as already signalled, but with inflation picking up, the focus will be on how much it revises up its rate trajectory. in the CEE and EM space Hungary’s MNB is seen hiking its official rate 100 bps to 4.40%, catching it up to the recent sharp rises in the 1-wk Depo rate (last 5.85%); South Africa’s SARB is expected to hike rates a further 25 bps to 4.25% and likely warn of higher inflation and rates, but also a drag on Trade and GDP from the Ukraine war; while Philippines’ BSP is likely to hold dates; Brazil’s BCB will also publish its Inflation report.

  On the political front, the emergency meeting of NATO leaders will be front and centre, though ultimately in the face of Putin’s brutal ‘bear-bating’ atrocities, the only real question is whether NATO is willing to consider options that would in effect amount to a declaration of war, i.e. imposing a ‘no fly’ zone over the Ukraine. Chinese authorities’ response to and management of the surge in Omicron COVID-19 variant appears to be signalling a shift away from is Zero Covid-19, which would reduce the economic threat from intermittent regional/local lockdowns. On a more profound basis, EU leaders will hold a 2-day meeting at the end of the week, at which measures to curb the EU’s dependency on Russian Gas, and some official chatter suggesting that a 75% reduction in Russian could still be achieved in 2022. Following on from the trademark idiocy of PM Johnson comparing the Ukraine war to Brexit, Chancellor Sunak presents the Spring Statement update, where the focus will be on what (if any) measures will be announced to cost of living crisis in the UK (and many other countries), which the April 1.25% rise in National Insurance contributions along with household energy bills is set to bring to a head.

  Commodity and Energy prices remain on a roller coaster ride, as most clearly seen in oil and other energy futures, but also more than self-evident in Agricultural and Metals. This puts the array of various sector conferences in the spotlight, with the 3 day FT Commodities Global Summit getting things under way, as the debacle around the LME Nickel market remains a major talking point. Over in Canada, the weekend failure to reach a deal between Canadian Pacific Railway and the Teamsters union, resulting in a stoppage in CP operations as of early Sunday, could not have come at a worse time, as it threatens to disrupt supplies of fertilisers and nutrients in North America during planting season for major agricultural crops, exacerbating supply chain threats due to the Ukraine war. Earnings from Chalco (aka Aluminium Corp of China) will also be in view.

  Government bond supply picks up after last week’s lull, with the US auctioning 20-yr, 2-yr FRN and 10-yr TIP, and a busier week in the Eurozone seeing sales from Germany, Italy, Belgium and Netherlands. The US Q4 earnings has largely been completed, but the week has plenty of corporate reports in China; Bloomberg News suggest that the following may be among the headline makers around the world: Adobe, Bank of Communications, China Citic Bank, China Construction Bank, China Life Insurance, China Mobile, China Pacific Insurance Group, Foxconn Industrial Internet, General Mills, Hong Kong & China Gas, Nike, Pinduoduo, SAIC Motor, Saudi Arabian Oil, Tencent, Xiaomi.