In this market‑update video, the host walks through a rapid series of developments that are driving a sharp rise in oil and other commodity prices and reshaping risk outlooks. He notes that WTI crude briefly touched $116.50 per barrel, the highest level since 2008, and that this spike is linked to the ongoing Russia‑Ukraine war, where Russia claims to have captured Kherson and talks between Kyiv and Moscow are slated to resume. He explains how these geopolitical moves affect market sentiment, potentially offering brief equity relief if dialogue continues, but also warns of continued volatility if talks stall. The host highlights U.S. diplomatic moves, including Secretary of State Antony Blinken’s trip to Eastern Europe and the postponement of a Minuteman III ICBM test to avoid escalation. He then details the financial fallout for Russia: Moody’s and Fitch have downgraded Russian sovereign debt to junk, MSCI has removed Russian equities from its emerging‑market index, and Russian‑linked GDRs and major banks such as Sberbank have plunged 98‑99% in two weeks. He notes Russia’s plan to inject $10 billion from its sovereign‑wealth fund to support equities, while the domestic market remains closed. The host shifts to broader commodity markets, describing record‑high wheat prices (over $11 per bushel, highest in 14 years) due to disrupted Ukrainian and Russian grain exports, and soaring metal prices (zinc, aluminium, nickel) driven by supply concerns. He connects these price spikes to stagflation risks, citing U.S. inflation at 7.5% and the Federal Reserve’s likely quarter‑point rate hike, with further hikes anticipated. A chart is shown linking oil price deviations from trend to subsequent recessions, underscoring recession risk. Finally, he mentions China’s tentative easing of its zero‑COVID policy, upcoming U.S. economic data releases (jobless claims, factory orders, ISM services PMI), and reminds listeners of the Amplify Me Market Maker podcast. The overall narrative ties geopolitical tension, credit downgrades, commodity surges, and monetary policy into a cohesive outlook on heightened inflation, stagflation, and recession risk.
Chapters
Hi everyone, hope you're doing well. Thought I would jump on because I've had quite a few messages this morning because WTI crude had briefly hit a high of $116.50 a barrel, the highest level since 2008. I've had lots of questions, so I thought I'd jump on, just summarize the actual situation here because it's not just oil that's moving, commodities are moving across the board, and this does have of course implications as well for knock-on subsequent effects for the Fed, the potential for a few future recession, and so on. So lots for us to quickly run through. So let me get you up to speed. So here we're at, at the moment, with the latest map of activity from a military perspective in Ukraine. Russia claims to have captured the port city of Kherson, is the latest in southern Ukraine. You can see down here, despite the stalling that's being seen at the moment on Kyiv— people have talked about that at the moment— and possible fuel and, and food shortages, the miscalculation of the types of resistance in the capital city. Most strategists that I've been reading are of the opinion though that it's somewhat inevitable that they'll regroup and make further inways into the capital city. Um, the main thing that we're looking out for today on this perspective really is that Ukraine have said that it'll take part in a second round of talks with Moscow today. There's no set time that I'm aware of at the moment, so of course that's something to look out for. An eventual outcome of that probably hopes will be managed in a sense of, um, kind of like the first round of talks. So in terms of market implications in an intraday environment, it could be that if they are open to continuing dialogue, then that's enough for markets to catch a little bit of reprieve, and actually you might see some mild or moderate relief movement. So upside in equities, perhaps, um, that's the way to interpret that, because we're not looking for a silver bullet and some type of peace agreement to happen this quickly. If they walk away from the table or the meeting in itself does not happen, we might just continue to revert back to trend of what we've been seeing at the moment. The other thing as well is that US Secretary of State Antony Blinken will travel to Eastern Europe beginning from today. So the US continues its efforts to reassure some of the neighboring countries around Russia who are involved with NATO, just to align all of the, the members within that team, so to speak. The other things that are happening you should be aware of: the US are going to postpone what's called the Minuteman III intercontinental ballistic missile test. They did have that planned for this week, and the rationale behind that is they just don't want to create an unnecessary elevated level of friction that might well cause things to materially worsen at this point in time. And it is worth noting though, I know that Putin has talked about arming of, of kind of nuclear readiness or the state of their activities, One thing I was listening to a strategist last night, I think it's a very valid point. It is worth noting that Russia does use historically its nuclear arms as what we kind of refer to as saber rattling, which is making kind of a lot of noise. It's not anything particularly new. They have made that type of commentary before, as sensational as it might sound when you read it in the mainstream press. When they test missiles, when they test new bombs. They even put it on their billboards showing it striking Florida in the US. So just to give you a bit of context, that's not new. And again, so it's kind of the threatening language, but nonetheless, the US does not want this situation to escalate. In other news, just having a quick run through other things. So this is it here about what I've just described with the missile test. The other thing that we've had is this, and Russia's rating has been cut to junk by Moody's. Fitch also slashed Russia's credit rating 6 levels to junk, and the MSCI is eliminating Russian equities from its emerging market index. So I did also share on my Twitter last night an interesting fact sheet from Reuters that they had prepared of fund managers' exposure to Russian markets, and definitely worth being aware of that because exposure goes into the, the tune of tens of billions of US dollars across the different funds. The other thing then here is looking at then just the impact that the sanctions and the, the SWIFT move, all the other things that we've seen imparted from the West on Russia. The Dow Jones Russian GDR Index, which does track Russian or London-traded Russian companies, has plunged 98%, as you saw from that headline, in just 2 weeks. Depository receipts for Sberbank have slumped 99% this week. Gazprom are down 98%. These are just absolutely insane moves. Bit of context here, Sberbank is the country's second largest bank, and they got cut off from SWIFT. They were specifically targeted, um, hit by the full blocking of sanctions from the US. The state controls just over 90% of VTB and around 50% of Sberbank. And what we have heard earlier this week, on Tuesday, Russia actually came out and said that they were going to deploy around $10 billion in order coming from their sovereign wealth fund in order to prop up and buy equities. At this point in time, the Bank of Russia is not going to resume their stock market. It's been closed all week, and it's unlikely to change anytime soon this week. They're going to make a separate announcement on their trading schedule on Monday is the latest, what we heard last night. The other thing, of course, what's happening, as I mentioned, is oil prices and WTI crude just smashed through $115 when I turned on my screens this morning. We've peaked up at $116.57 in WTI. We've pulled back a little bit to $113.50, but as you can tell from these price quotes, it's very fluid price movement at this moment in time. And as you can see here, it's the highest we've traded since 2008 as the Russian invasion upends the market. To have a little bit of context, this is what we're looking at. And of course, this comes a day after we had the OPEC meeting As I was kind of talking about in the briefing on Monday, I wasn't really expecting too much from that. I thought that they would kind of steer away from the political entanglements that would come with moving off their predetermined plan, which is the return of supply at a much more kind of graduated 400,000 barrels per day, of which they stuck to. And my understanding is actually it was a super quick meeting. I think it was like 13 minutes. They just came out decision. We're not going to budge from that, that standpoint at this point in time. There's a lot of political layers that come with OPEC, and I doubt the Saudis really want to do anything to get involved with this Russian situation at this point in time. So without that kind of interjection with them to add further supply, with even despite prices rising, probably another factor. But what's been really happening is this whole potential repositioning of this supply shock that could come by way of disruption to supplies coming out of Russia, of course. Now, one of the things I wanted to mention is that it's not definitely not just oil. Wheat prices, as we know, Ukraine, Russia ship more than a quarter of the world's export of wheat. There are many countries, particularly fairly close in the region, like Egypt, for example, which are very almost entirely dependent on wheat supply coming from that particular area, which are going to really feel the pain of some of these latest price movements. But wheat has also surged to a similar type of level, highest level since 2008, soaring past $11 a bushel to the highest in 14 years. Essentially, problems with fighting has closed ports, it's halted transport, and it's severely hampering logistics at the moment, which is causing the, the move higher in price. The other thing to be aware of here as well is that the war also threatens playing into the planting season for this year in Ukraine, of course, because while everything is going on, that's unlikely to happen from an agricultural perspective. So seeds, fertilizer, these other key components of that process are going to be in short supply. And the risk is growing that shortages are likely to spill over to the next season and potentially even longer. So the reason for the really sharp incline in these soft agricultural goods, particularly sensitive wheat and corn and so forth. It's not just because of now, because the implications it will have on the future as well. Um, not only this, other commodity prices as well are surging at the moment. So as you can see here, uh, metals extend scorching rally, zinc topping 4,000 on Russia. Here's a look at, um, the black line, which is LME zinc here at the bottom. Then you've got LME aluminium and nickel. So zinc is at its highest level since 2007. Aluminium is trading at a record high level at this moment in time. So it's just a lot going on at the moment. And what this of course leads to, which is something my colleague Eddie was talking about in some of his LinkedIn posts— if you don't follow him on LinkedIn, Eddie Dommez from Amplify, you definitely should. He puts out some great intel. But he was talking about in a post yesterday about this idea of stagflation. So we've just talked about at the moment all of these energy prices, but more broadly, commodity prices surging. And it comes at a point, of course, where on an annualized basis in the US, inflation is at 7.5%. So it's incredibly high, sort of 4-decade high at the moment, but it's likely to go even higher. And this comes at a point where the Fed are committing to hiking rates. So Jerome Powell spoke yesterday. He delivered his semiannual testimony to the House. He's going to do it to the Senate today, which is a recycle of those comments. But he basically said, and let's just check out the pricing of a Fed rate hike going forward. He said the central bank in the US needs to proceed carefully, emphasizing the need to be nimble. But he did say he's inclined to back a quarter-point hike from the Fed. So this idea of 50 basis points we were talking about just a few weeks ago is dead as a dodo now. That doesn't exist. Market pricing now is either they hold rates forget any hike, which is a 2.2%, very minority market positioning for that. The overwhelming majority— I mean, the guy said it himself yesterday, he wants to back a quarter hike. So I'm not sure what these people are pricing in here, perhaps on a continued escalation Russian situation, which changes the dynamic. But even then, with inflation surging, the Fed are left with very little other options at this point. So yeah, 25 is on the cards. The Fed are still going to hike, and it's likely to be then a series of rate increases. And why I say that is because that's what Powell has said, right? So we're still talking about multiple rate hikes to come in the future. Now, the problem, of course, here becomes, um, these— this chart here. So this is just looking at a study of real oil price percentage deviation from trend and subsequent impact then on timings of recessions. And so the idea here is that you're hiking into a market which is going to be feeling the pains. Consumer confidence in America, despite other elements of the economy proving robust— what we've seen in other areas, particularly like we're likely to see in the jobs data at the weekend because Omicron is declining, so jobs markets are picking up and so forth— a lot of the, the factors are supporting on one way for hiking, but in another way consumers are feeling the pain of inflation. They're becoming less confident and these prices are going further north at this point in time. So here, whenever oil basically has got to around these levels, it's tend to have been a somewhat trigger point for then a subsequent recession to follow thereafter. And this is what the markets are trying to tackle and manage at this point in time. Final things I just wanted to mention was this. Something to be aware of is that China's consumer and retail shares were actually up overnight and quite significant U-turn in what otherwise has been a kind of policy enforced over the last 2, 2.5 years since the onset of COVID which is they're going to weigh an exit from their strict zero tolerance COVID policy. Now, this isn't going to happen immediately. This was according to sources in The Wall Street Journal overnight. They were talking about Beijing unlikely to ease controls until next spring. However, opening measures could arrive in select cities as a testing measure earlier. And so that's, that's definitely, I'd say, action that's being taken given some of the pressures that are being also felt in the Chinese economy from a growth perspective, as we know, which has been decelerating of late. The rest of today, just while we're here, on the call. Um, we've got the various service final PMI numbers. Again, as I said, these are final readings, so nothing to get too excited about. ECB minutes, they're going to be very stale, I would say, given the fact that the geopolitical situation has really dominated proceedings, and that's coming the interim period between when that meeting was conducted and where we're at now. Um, you've then got weekly jobless claims this afternoon, US factory orders, ISM Services PMI, coming out as well, as well as Powell's going to recycle that speech this time to the Senate Banking Committee. But look, that, that's it from me. Just thought I'd do a quick update. Don't forget, we'll drop the latest podcast if you just search for Amplify Me Market Maker on Spotify, Google, Apple, so forth. You'll be able to find the latest conversation between myself and Piers. Going to record that later on this afternoon. All right guys, hope that helps. Take care and I'll see you for the next session. Cheers!
