In this market wrap‑up, the presenter provides a concise briefing on the latest developments affecting global markets. He begins with an update on the Russia‑Ukraine war, noting the stalled civilian evacuation from Mariupol, Russia’s strategic aim to encircle Kyiv, and President Putin’s demands for Ukraine’s demilitarisation and recognition of Crimea. A geopolitical map illustrates NATO’s eastward expansion and why Ukraine is a strategic buffer for Russia, with references to the CSTO and Russia’s defensive posture. The segment then shifts to the financial fallout from sanctions: Russia’s decree allowing payments to foreign creditors in rubles, the winding down of VTB’s European operations and Sberbank’s exit from Europe, and the suspension of Visa and Mastercard services in Russia. Energy‑market implications are examined, covering US‑EU coordination on potential Russian oil bans, Libya’s production drop to 920,000 bpd amid political turmoil, and Iran’s stalled nuclear‑talks that keep oil supplies constrained. China’s economic outlook is reviewed – a 5.5 % growth target (the lowest in three decades), Xi Jinping’s bid for a third term, and policy levers (rate cuts, fiscal stimulus, easing COVID‑zero) aimed at reviving growth. A brief equity note mentions DoorDash’s aborted takeover bid for Deliveroo. Looking ahead, the presenter highlights two key data releases: the ECB’s March policy meeting (expected to keep options open and avoid signalling QE or rate‑hike timing) and the US CPI report forecast at 7.9 % YoY, the highest since the early 1980s, with implications for Fed policy (likely a 25 bp hike at the March meeting). He also notes the University of Michigan consumer‑sentiment survey as a gauge of inflation‑driven spending pressure. The video concludes with a reminder to follow his Twitter for updates.
Chapters
Okay, good evening. It is Sunday the 6th of March. I hope you're doing well. And our usual wrap-up of the major headlines to be aware of from this weekend, particularly on the Ukraine situation, but also an outlook for the week. We do have things like the ECB meeting and also US CPI on Thursday is expected to come in at 7.9%. So what does that mean for the Fed going forward and the market in itself? We'll talk about that in a moment, but let's kick things off with looking at the map of the latest, where Ukraine has called off an attempt this weekend to evacuate civilians from the city of Mariupol, which is based down here in the southeastern corner. Very contentious area, of course, because this is in the Russian separatist area of Donetsk and Luhansk, and also just north of where forces over the Crimea have taken control over that southern, um, port side of the country. Uh, military experts still expect Russia's main objective will will remain to be the encirclement of Kyiv, the capital. Here's some of the direction of Russian advances at this point in time. Uh, the capital appears— in terms of Russian, uh, progress has been very little overall because the tactical and believed to be logistical failures. However, this will be a key thing we'll be looking out for later on this week as they will look to still continue to take on the capital city in order to neutralize the country in itself from a Russian perspective. On that point, Vladimir Putin has met with his Turkish counterpart, as you can see here, Erdoğan, and said that Kyiv must agree to his demands if fighting is to end. And just to refresh your memory, what are Putin's demands? Well, he wants demilitarization of Ukraine and recognition of Crimea. And to give you an idea again of— go back to the drawing board of what is the rationale and why is actually Russia doing this— well, here's a look at NATO and how NATO has expanded eastwards, which really kind of cuts to the heart of the rationale of why Russia has taken this action. So here's Russia, of course, on the right-hand side, Ukraine here in the yellow, and as you can see, the UK or England with, with France, Italy, and the rest have been part of NATO for a long time. But what's happened is over time, going through 1999, 2004, through to 2020 specifically, as NATO has gained further geographic coverage further into Eastern Europe. So starting up here where you've got the likes of Lithuania, Latvia, then you come down to Poland, Slovakia, Hungary, and then Romania down here. And if you look at this then from a geography point of view, you can see the rationale why Ukraine is such an important territory for Russia to hold off the NATO advance further east. Because if you actually look here, this, this country here, obviously north of Ukraine, is Belarus. And Belarus forms part of what's known as the CSTO, which is the Collective Security Treaty Organization. So it's kind of the Russian counter to that of NATO, which is mainly Western Europe. And this would include countries like Russia themselves, Belarus, but also Georgia down here in the south. And looking at this from a defensive military position, you can see Georgia here to cut off some of the, the southern side of the entry from geography coming up through the Black and Caspian Sea. The annexation of Crimea, of course, in 2014 to take control of the Black Sea as a defensive position. And then you can see importance of— they have overall kind of control of Belarus in this treaty, but then Ukraine, you can see why it's so important, because otherwise it would open up an expansive territory for then the potential— not the likelihood of this would ever happen— for the NATO and Western forces to be able to move into Russia. And obviously Russia very vulnerable with that because of the plains, of the way of the setup of the geography of Russia. It would mean that the land here is so expansive it would be indefensible from a Russian point of view, and hence the reason they have to take control and hold on to Ukraine as a last kind of red line. So hopefully that kind of updates you and reminds you of, of why we're at this particular juncture and why Russia is very unlikely to let this go at this point in time, because strategically, um, the geography is that Ukraine holds the key here, because with them already with Belarus in control, um, this gives them a fortified kind of geography line of defense at this point of time. The other things then to be aware of, a few other headlines, is what's been going on financially with Russia, obviously under great pains at the moment with the latest sanctions. And Russia and Russian companies will be allowed to pay foreign creditors in rubles, it's come to light over the weekend, according to decree signed by Vladimir Putin on Saturday as a way to starve off defaults while capital controls continue to remain in place. The other things that we've heard as well this weekend is that Russia's VTB Bank is preparing to wind down its European operations after being hit hard by sanctions, according to the FT, as you can see here, citing people familiar with internal discussions. Equally so, Sberbank, Russia's biggest lender, has decided to exit the European market last week, and together Sberbank and VTB account for more than half, half of Russia's banking market. So really severe impact that this is having, of course, at this point in time. We're unable to see Russian-related stocks. They haven't traded as yet since all of this has begun, and the Russian stock market will be closed for trading to at least Wednesday. But it wouldn't be too much of a shock to see that rolled over a little bit more again. And then from a corporate perspective, although there's been lots of companies now coming to light, the latest being that Visa and Mastercard announced over the weekend that it will suspend their operations to Russia. So that's kind of your latest roundup of what's been going on there. The other things that are kind of indirectly related to this, with the energy market, of course, being a key component that the markets are looking at here because of the knock-on implications for inflation and subsequent then reaction function from central banks. The US is said to be in talks with European countries on a joint approach to any ban on Russian oil imports that could still ensure adequate supplies, as according to the US Secretary of State, Antony Blinken, over the weekend. So keeping an eye on that for sure. And then elsewhere, there's Libya and Iran updates as well to be aware of from an energy perspective. So for Libya, oil production has fallen to 920,000 barrels a day as the Shahara, their biggest field, and El Feel have both been shut down. To give you a bit of context, the drop down to 920,000 comes as crude was pumping at about 1.2 million as of the middle of last week in Libya. The parliament— and while this is happening, as parliament swore in a new government last week to replace the existing PM and his administration, but he's resisting an attempt to remove him from power. And that's heightened risk of renewed civil war in Libya, which is very commonplace in that country, of course, seeing big volatile swings in their amount of production. But of course, then that means that there's less production, albeit we're talking just under 300,000 worth. But of course, this comes in the context of at the moment WTI crude closing at a $115 handle, the closing futures trade last week at a 2008 high. The other thing then that people are looking out for in the energy market is Iran. So this is another factor that could well support the bull case for crude oil prices at the moment. This is because traders are watching out for any further delays in the Iranian nuclear talks following Russia's demands that they want US guarantees that the sanctions it faces over the Ukraine conflict will not hurt its trade with Tehran. And we know, of course, that there's a close relationship between those two countries. If— even if the deal does come through, I was reading a few things over this weekend, and it was saying that if a deal was struck and Iran does go back to that 2015 nuclear accord deal in whatever shape or form, It would take several months to restore oil flows even if it reaches a deal. And obviously the, the pain at the moment of the supply risk is very immediate. And so even if it was to strike a deal, which I'd still think— I've always been quite bearish on the prospects of that happening, and particularly given Iran's close ties to that of Russia, I don't tend to see that happening this week. And it could be another bullish factor as well to support prices going further forward. Iran's top authority, Supreme Leader, uh, Khamenei, of course, has publicly and privately been calling for closer ties with Russia due to the deep mistrust that they have as a collective over the United States. So hard to see that deal going through anytime soon. So any of that risk of kind of thoughts of supply coming to market to fill the void of looking to counteract the rising price, I think it's probably unlikely to happen at this point. And then you've got China. You probably would have read over the weekend they've unveiled a growth target of about 5.5%. 5.5%, many countries would kill for that type of growth level at this point in time. But that is, as far as the target is concerned from China, the lowest in 3 decades. It does follow a year-on-year growth of just 4% in the fourth quarter of 2021. But at 5.5%, in context, it is actually above what some other estimates have been. So it's a little bit more bullish on their side than, say, the IMF, which I think was down at a 5% range. So it's not as bad as the kind of headlines are coining it at this point. Beyond that, there's something bigger here for China. And really, that is the idea of them shoring up its political significance to the Communist Party. And President Xi is expected to make that unprecedented bid to stay as the leader for a third term at a key party meeting, of course, later this year. And a couple of things that have been happening, this Russian, the aggressiveness of this Russian move, obviously ties between those two countries were getting increasingly stronger. It was only prior to the, the Olympic Games that we had, the Winter Olympics in China, where the two were talking about unlimited potential for their relationship. But then Russia going ahead with what they've done, seemingly not informing completely the Chinese of their actions upfront, has seen China pivot more towards the West. So Xi's got to deal with that. Xi's also dealing with the housing market seeing mounting defaults. He's also dealing with the country cracking down on the biggest technology companies that scared off a lot of foreign investment. So there's a number of things going on here, and Xi needs to silence the critics. He needs to also keep growth kind of just at pace in order to then really cement then his legacy as we get in towards the back end of the year and we have this him standing for his unprecedented bid to continue on in power. So the end result here is most analysts are expecting China now to be looking to do further rate cuts, increase fiscal spending, everything and anything to do to just get the economy firing again. And we, of course, heard last week about the Wall Street Journal breaking that news that although it's going to be about a year's time, they'll look to loosen coronavirus restrictions given they've had a zero tolerance policy. There's certain cities that they'll be experimenting with, and that could also help unlock some of that future growth potential. And it's important that he frontloads that growth in order to then really hit the mark when they have that top-level Communist Party meeting later on this year. Other things that I thought, just quickly, that was quite interesting, one was an equity story. So keeping an eye on Deliveroo, when they open later on on Monday, US food delivery company DoorDash is said to have considered a takeover bid for London-based Deliveroo, but the two sides have failed to reach an agreement. Of course, Deliveroo has had a shocking performance since their IPO, which would have been, what, a year ago or so. So yeah, be interested to see how their shares react when they get underway. But as far as this week is concerned, I'm not going to go over everything in a line-by-line statement. All I'm going to say is really Thursday is the key day of which I'm most excited about from a schedule point of view, and that's because you've got two major releases, one being the ECB, their latest interest rate announcement. They're expected to postpone any major policy decisions when they meet and preferring to maintain as much flexibility as possible while assessing the economic fallout from the war in Ukraine. They do also put out their latest forecasts on things like inflation and growth and so forth. But contrary to the December meeting, the ECB will want to avoid hinting at the end dates for quantitative easing or start dates for rate hikes, because, you know, the pattern prior to the Russian-Ukraine situation happening was that March was kind of penciled in when there was a lot of policy maneuvers to happen— the Fed to trigger the rate rise cycle, the ECB to end their active kind of QE and so forth. And in terms of details, probably that's going to be a much more light touch now as they try to hold things off to see more clarity over how the Ukraine situation plays out and energy prices and so forth. The other thing, of course, on Thursday is US CPI comes out as expected at 7.9% year on year, up from the 7.5%. So we're talking about the, the highest year-on-year rates of inflation in the US since the early 1980s. The rising cost of heating oil, gasoline has been exacerbated, of course, because of the conflict in Ukraine. And analysts at Barclays say that's likely to have driven energy prices up by around 4.7% themselves alone, just on the energy side of things. Regardless of inflation in the US likely to go up to near 8%, is it going to really change the game for what markets are expecting from the Fed? I don't think so. So as far as the March meeting is concerned, which will be next week on the 16th, I think that the 50 is probably off the table as per what Powell's comments were at his semiannual testimony last week, hinting towards a preference for 25. So I think that's locked in. And then the subsequent rate hikes will of course be looking out on those dot plots and further communication when that meeting comes around. And then the other thing that's happening on a Friday, which could be quite interesting, you can see I'm looking at a calendar here from ING and their analysts have said that they're closely monitoring the University of Michigan sentiment figure, which comes out on the Friday, and mainly that's to see if the Russian invasion and its potential economic hit to household spending power via the sharp increase in gasoline prices is having any type of impact yet further on the sentiment of the US consumer. The worst thing that you're going to want to have is spiking inflation, demoralizing consumers at a point where you're having to hike rates. Hence the reason why this kind of risk of recession in the future, given the rate hikes to come, could well be a further talking point that will intensify over, over the period ahead. All right. That is it. So quite a lot to digest there. I know if you want to refresh on any of the notes that I've covered there, you can just jump on my Twitter account. My handle's there. And yeah, anything substantial that happens on the Russian situation, I'll be sure to put out a fresh video. Throughout the rest of the week. But thanks for watching and have a good week ahead.
