The FED meets amid Ukraine crisis

In Switzerland, the unemployment rate fell further in February to 2.5% from 2.6% the previous month.

American consumer price index continued to rise in February, reaching 7.9% year-on-year, driven by soaring gasoline prices (+6.6% compared to January). This persistent high inflation and the war in Ukraine are weighing on consumer morale.

India is considering what to do about a Russian offer to supply it with crude oil and other raw materials at a discounted price in return for payment in a rupee/ruble system. International sanctions against Russia do not prevent India from importing Russian oil. The quantity of goods that could be imported was not specified, nor was the discount offered.

Despite the fact that the Russian invasion of Ukraine is clouding the economic outlook in the Eurozone, the European Central Bank has decided to accelerate the phase-out of its debt purchases while leaving itself time to act on rates. Yields on Eurozone sovereign bonds soared after the central bank said it planned to end its bond-buying program in the third quarter. The single currency initially rose to $1.1120 but this was short-lived and the currency quickly retreated to $ 1.1000. The bank raised its inflation projections while reducing its growth outlook in light of rising commodity prices. It also said that interest rate adjustments would take “some time” after the end of bond purchases but would be gradual.

The main financial markets traded in a mixed bag last week as the conflict between Russia and Ukraine went on. European equities, which had significantly underperformed due to their greater exposure to the Ukrainian situation managed to rebound, while their US counterparts declined.  Euro Stoxx 50 today at 3827.

The FED started its meeting yesterday and is expected to raise its key interest rate by 0.25% by the end of the day. The Monetary Policy Committee is also expected to give indications on the pace of the hikes as well as the target. An update of its forecasts for GDP growth, inflation and unemployment. In the meantime, the dollar is consolidating its fundamentals and is currently pivoting around 0.9400 vs CHF. There was little movement in the other currency pairs overnight.

In the meantime interest rates went a bit higher for US 10 year treasury being at 2.18% and 10 year German Bund at 0.37%.

Thirteen senior US officials, including Joe Biden and Secretary of State Antony Blinken are banned from entering Russia. On the food front, Russia has introduced temporary restrictions on the export of certain grains. Russia and Ukraine are major exporters of this commodity. The market is severely disrupted by the crisis between them.

Oil fell sharply, driven down by potential relief in the Ukraine-Russia talks but also by a lockdown in Shenzhen, a technology hub in southern China. WTI lost 10.55% to USD 98.50 a barrel and Brent crude dropped 9.95% to USD 102.90 a barrel.

Asian stock markets are rebounding today. The latter are benefiting from the Chinese tech stocks, which had been depressed in recent days as investors feared that many of them would be banned from trading in the US. The Hang Seng jumped more than 9%! Alibaba premarket jumps to 20% on the Chinese government vows to support and keep market stable amid historic rout.