Conflicting News on Russian/Ukraine Crisis
February 21, 2022
The one certainty at the Ukraine border is that a full-scale Russian invasion has not begun. Beyond that, its unclear whether to be more or less frightened about prospects than before the weekend. U.S. President Biden has agreed conditionally to meet with Russian President Putin. The condition is that Russian not invade before such talks, and the timing and ground rules of the summit have not been worked out other than that Blinken and Labrov would be holding preparatory talks this week. From Russia’s side, Putin is reportedly warning of rising tensions and has called an emergency meeting of his National Security team. Aerial views of the border do not suggest any pullback. French President Macron has been trying to act as a mediator, and Russian spokesmen will not confirm any plan for Putin and Biden to discuss the situation.
Today is Presidents Day in the United States, which may deprive financial markets of badly needed leadership at this tense juncture.
Equity markets in Europe today have dropped rather sharply, with losses so far of 1.4% in France, 1.3% in Italy, 0.9% in Germany, 0.7% in Spain but just 0.2% in the U.K.. Share prices also closed down by 0.8% in Japan and 0.7% in Hong Kong.
The dollar overnight has slipped 0.1% against the euro, loonie, sterling, peso, and on a weighted basis. The yen is 0.2% firmer.
The price of West Texas Intermediate oil rebounded 0.5%, while that of gold is 0.2% softer.
Ten-year German bund and Japanese JGB yields are unchanged from Friday closing levels.
Economic data news today features preliminary February purchasing managers survey findings. Such reflect a further relaxation of Covid restraints and some alleviation of supply chain bottlenecks, but pent-up demand and elevated energy costs continue to drive unacceptably high inflation.
Euroland’s composite purchasing managers index climbed to a higher-than-forecast 5-month peak of 55.8 from January’s 11-month low of 52.3. The manufacturing PMI slipped 0.3 points to a 2-month low, and service sector growth accelerated to a 3-month.
Within the euro area, Germany’s composite PMI covering all private sector activity reached a 6-month high of 56.2, while the French composite index printed at 60.2, its best score in eight months.
Great Britain’s February composite PMI (60.2) and services PMI (60.8) also represent eight-month highs, but staffing shortages kept the manufacturing index at the same level as January’s four-month low.
Likewise, Australia’s composite PMI of 55.9 was its best score in eight months, and the services component printed at an 8-month high too of 56.4.
By comparison, Japan’s preliminary purchasing manager results this month were very disappointing, with services (42.7) showing its fastest pace of contraction in 21 months. Along with a 5-month low in manufacturing (52.7), the composite index of private sector activity, which had been above 50 as recently as December, dropped 4.2 points to a 20-month low of 44.6.
German producer price inflation continued to accelerate last month, with a record 25.0% year-on-year increase and a 2.2% month-on-month increase. Energy costs soared 66.7% on year, while all other items collectively went up 12.0%. The average 10.5% PPI rise in 2021 followed benign movements of +1.1% in 2019 and -1.0% in 2020.
Chinese property prices in January posted their smallest year-on-year increase in 73 months. The rise of 2.3% was down from 4.9% last May. A major policy priority of the last year has been taking steam out of China’s overheated housing market.
The People’s Bank of China made no changes this month to its 1-year Loan Prime Rate of 3.7% or 5-year Loan Prime Rate of 4.6%. Last month those rates were cut by 10 and five basis points, and in December the one year LPR had been reduced by five basis points.
The Bank of Jamaica lifted its policy rate by a steep 150 basis points to 4.0%, its highest level since the middle of 2017. This tightening followed increases of 100 basis points last September and 50 bps each in November and December. Jamaican CPI inflation, which is targeted at a range of 4-6%, had risen from 3.7% last February to 7.8% by November.
Real GDP in Thailand recovered 1.6% in 2021 after plunging 6.2% in 2020. GDP grew 1.8% last quarter, the most since a 7.0% dead cat bounce in 3Q 2020. GDP last quarter was 1.9% above its year-earlier level versus a 4.2% on-year drop over the four previous quarters ending at 4Q 2020.
Hong Kong’s jobless rate of 3.9% over the three months through January was unchanged from the 4Q 2021 mean but down from a 17-year peak of 7.2% sustained in the three months to February 2021.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Jamaica, Biden and Putin, February purchasing manager surveys, German PPI
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