This Week In Markets: 21st - 25th February (Full Russia Update, UK Covid Rules, Latest Fed Call)

Okay, hope you're doing well. It is Sunday the 20th of February, so our usual look ahead for the week and plenty to get you up to speed on, on the Russia-Ukraine situation that continues to be the most dominant theme. But some other news to look out for this week, namely the loosening finally of restrictions in the UK of coronavirus from the UK government. PM Johnson set to unveil those on Monday in Parliament. We've also got updates on the likes of Tesla Fed views— will they pull the trigger on 50? And what are some of the major US banks thinking about the number of consecutive hikes to come? JP Morgan being one at the weekend saying they're now looking for 9 rate hikes consecutively of 25 basis points. And then we'll look at the week ahead. US President's Day, of course, on Monday, but we've got the flash services manufacturing PMIs to come to kick off the week. It's bookended at the end of the week with US GDP and US core PCE numbers. But let's hop straight to it and talk about Russia and what's happening in Ukraine. Russia, Belarus have said that massive joint military drills will not end today, i.e., February 20th, Sunday, as planned, and that Russian forces will remain in Belarus indefinitely. And this comes, of course, after tensions have been growing. Lots of reports, mixed reports about explosions, gunfire, and so forth in the eastern part of Ukraine. This is the kind of map Moscow essentially has masked now now about 190,000 troops on Ukraine's border, including those participating in these latest drills. And this comes, of course, despite previously pledging that they had returned to base. Other things you should be aware of, just amalgamating some of the major headlines that have come out in the last 24 hours or so: President Joe Biden convened a National Security Council meeting on Ukraine for Sunday, and that did include talks with Russia and Ukraine. They're going to hold talks on Monday towards a restoration of the ceasefire deal in Ukraine's Donbas region, according to a French official. And separately, French President Macron and Vladimir Putin agreed to talks during their call on Sunday. Now, some of the latest coming out of the US to be aware of is the Secretary of State, Antony Blinken. On Sunday, he told CNN that diplomacy remains possible in the Ukraine crisis, that Biden was still willing to engage with Putin at any time in any format. Blinken said he is still planning to meet Foreign Minister Sergey Lavrov in the coming days. And at the moment, again, although tensions are incredibly high and the risk, of course, tail risk of a misinterpretation of a gunfire or a separatist movement that could trigger something more meaningful and a retaliation effect is still alive and present, one thing I would say is that despite the rhetoric being very aggressive coming out the US Russia have been in dialogue with these other European and US officials. And so I still think the risk of a full-blown invasion remains low. If you want more on that view from the lens of geopolitics in particular, and as well as the domestic situation in the US that really drives some of the rhetoric coming out of Biden, then check out the podcast that we put out on Friday on Amplify Me Market Maker on Spotify and Apple. We talk about it in great detail. But the latest headline to come out just before I started this briefing, and this is on on Sunday night, uh, is this. The US have said they've told allies that Russia invasion of Ukraine would potentially see it target multiple cities beyond the capital of Kyiv, according to 3 people familiar with the matter. So again, usual rules apply, I think, when you're trying to interpret this type of information. This type of leaked messaging with a little bit of a lack of substance has been pretty consistent coming out of the US. We know they're trying to strong-arm the optics, just to manage some of the domestic appearance of dealing with the foreign affairs issues at the moment. So I wouldn't get too excited about that type of comment, to be quite honest. And I'd just be cautious about how to interpret information that you see and always try to fact-check and verify and just be aware of the, you know, if it's the state-run news agency in Russia, they're probably going to be having an agenda with what they're reporting. So something to keep in mind. Otherwise, look, the final thing is I, I did a post on my LinkedIn account. I'll drop my link to my LinkedIn, the Finance Accelerator that we're running this week, the daily newsletter I put out. I'll drop all the links into the video, so just check out the description if you want to get access to some of that stuff. But on my LinkedIn account, just a few hours ago, I tweeted really useful note by the analyst at Citi. I know it's hard to see here, but if you go on to that, that post, you can click on it and it basically gives you a rundown of 40 European stocks which have the most Russian exposure, and it's quite a useful kind of crib sheet to have, certainly if you're looking at single stock or even index trading in some of the European names. But otherwise, just pivoting to the UK, this really isn't market moving as far as from a trading perspective in the short term. Certainly though, it will have repercussions on going forward in the weeks and months ahead because now tantamount to the full reopening, and that's because PM Johnson is due to lift remaining COVID restrictions in England on Monday and will announce that people testing positive for coronavirus will no longer have to self-isolate. Positive tests in the UK have continued to fall from an early January Omicron-driven peak that we saw. Of course, the number of patients hospitalized is also down quite sharply. Daily COVID deaths are now running about— to give you context— 90% below the peak from early 2021 before vaccines were widely available. The rationale behind that decision from the Prime Minister, but again also looking to appease a lot of the pressure he's been on with some of the restrictions that have been in place, albeit on a fairly light touch, um, that have really again provided more internal fighting in the Conservative Party. So that's going to go ahead this week. The other thing then is where are we with the Fed? And this was quite interesting over the weekend. JPMorgan economists now said they see the Fed will likely raise interest rates by 25 basis points at each one of the next 9 consecutive meetings. We've kind of seen US banks do this. They've gone from basically 3 to 5 hikes this year to 7 hikes this year. Now they're saying all meetings this year plus another 2 next year. JP's kind of like right out there on the extremity of the views at the moment. In terms of the CME FedWatch tool, which looks at short-term interest rate futures, so the federal funds rate which you can then determine the probability of a 50 basis point rate hike in the March meeting, that now has dropped to 22%. You remember after that red-hot inflation number we had around a week and a half ago, that number was as high as 95%. So just given the geopolitical uncertainties, which probably are not going to go away anytime quickly at this present point in time, and also just some of the nervousness that's now ensuing on the back of some of the valuation decreases that we've been seeing in the equity space, the volatility pickup, the repercussion of what some of the yield curve movement is indicating as well about the Fed gets this wrong in terms of the tightening cycle. People are starting to ease off the gas about this go-big-first-move and more about a coordinated smooth transition of rate hikes going, going further forward. Tesla, just a quick word, they are trading at the close of last week down around $1,250 at the moment. Remember, they were up just a few months ago, up around the $1,200 mark when they were really at the peak of their powers. At the moment, the latest news to look out for this week is Germany's Federal Motor Vehicle Office— they're called the KBA— they're investigating Tesla's automated lane change function and whether it's going to be approved for use in Europe, essentially, according to German press citing sources at the weekend. Last week, the U.S. National Highway Traffic Safety Administration opened its second probe into the Autopilot defect. So something just short-term to look out for, for Tesla shares. But as far as the week is concerned, of course it is US Presidents' Day, so markets are closed in the US Monday. But nonetheless, that doesn't mean that we're not without a fairly busy, busy docket because we get the EU/UK Manufacturing Service PMIs to really kick things off. Essentially We've got rising geopolitical tensions. Inflation fears are obviously rife at the moment, but falling COVID-19 infections has resulted in the easing of restrictions, and it is expected to have boosted European activity in February from a sentiment basis. So we are expecting these to be somewhat on the upside against prior readings. For similar reasons then, the German IFO reading, which is the survey of German businesses, that's going to come out on Tuesday morning. That's also expected to see a a very minor uptick as well from the previous reading in January. Um, of course, US markets closed Monday, so that, that corresponding data on the PMI side will come out on Tuesday from Markit. Um, just skipping forward, Wednesday not too much on the docket, but Thursday you get the second reading of Q4 US GDP. You also get the weekly jobless claims and new home sales coming out of the States. And then on Friday you get the core PCE numbers expected the core PC in the US to come in at 0.5%. That would bring the index to 5.2% rise over the past 12 months, up slightly from the 4.9% increase that we saw at the end of last year. And that marked at the time the largest gain since September of 1983. So shouldn't really come as too much of a surprise. Obviously we're pretty well set now after the direction of travel of inflation at the moment, but nonetheless that will be keenly watched as the preferred measurement of inflation for Federal Reserve kind of bored thinking. Just final things to say. Yes, you guessed it, he's back. Reports over the weekend, Donald Trump's new social media venture, Truth Social, they appear set to release their Apple— their app on the Apple Store on Monday. And of course, Monday is President's Day. So, yeah, you got to— you can always count on Donald to cause maximum splash at the point of where obviously Biden is, is struggling on multiple fronts at the moment. So I guess this is kind of the gun firing really on the midterms in some respect. All right. That is it. Again, any questions at all for me, just let me know in the comments below. Otherwise, as I said, I'll drop a couple of useful links. Do check them out. And yeah, have a good week ahead. Take care.