MARKETS

US inflation, European Central Bank decision on interest rates and RBA’s Philip Lowe on agenda of what markets will be watching this week

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This week’s massive rally in commodities prices underscores the war’s effect on global inflation. The cost of crude oil, metals and grains soared, as raw materials staged their most stunning weekly surge since 1974 and the days of the oil crisis.

These developments will continue to further extend to consumers as they fill up their vehicles, shop at grocery stores and pay their heating bills. Thursday’s US CPI report may reflect a portion of the war-led spike in commodities.

Other US data in the coming week include figures on January job openings and March consumer sentiment. There are no scheduled Fed speeches as the central bank enters its pre-meeting blackout period.

Elsewhere, Russian inflation may show a further surge, South Korea will hold a presidential election, and the UK economy probably had a small expansion in January.

Australia and Asia

In Australia, Reserve Bank Governor Philip Lowe speaks twice and is likely to reinforce his message of patience on interest rates amid low wage growth and geopolitical instability.

South Koreans will choose a new president, with conservative former prosecutor Yoon Suk-yeol leading in polls in the race for the Blue House.

The winner will take the helm of Asia’s fourth-largest economy and one of the world’s key computer chip suppliers. Runaway housing prices, high personal debt and yawning income gaps are among the issues that could push Koreans to switch from the ruling Democratic party and its candidate, Lee Jae-myung.

Yoon Suk-yeol, the presidential candidate of South Korea’s main opposition People Power Party. PA

In Japan, the latest wage data is likely to underline the scale of the challenge faced by Prime Minister Fumio Kishida as he tries to lift pay.

Japan also releases revised growth figures for the last quarter, which are likely to show a stronger rebound, although omicron, supply snags and Russia’s invasion of Ukraine could tip the economy back into reverse this quarter.

China’s National People’s Congress started on Saturday, with about 3000 delegates meeting in Beijing for annual legislative meetings. It is the biggest political event before a twice-a-decade party leadership reshuffle slated for the second half of the year.

China will also release trade data on Monday and inflation numbers on Wednesday.

Europe, Middle East, Africa

A first glimpse of the inflation shock threatening Russia’s economy amid unprecedented global sanctions will emerge in February data due on Wednesday.

Economists predict an acceleration to 9.15 per cent. While that would be the highest since early 2016, it is only a forestaste of what’s likely to transpire.

Elsewhere in the region, data on Wednesday may show Hungarian inflation at 8.5 per cent in February, while a Czech reading the following day might exceed 10 per cent for the first time in almost a quarter of a century.

Concurrently, the Czech Republic’s austerity-minded coalition is set to approve a revised 2022 state budget as its plans to cut pandemic-era deficits are confronted with economic fallout from Ukraine.

Aside from the ECB, other central banks in the region responding to the altered landscape of war include those of Poland, which analysts forecast will raise rates by 50 basis points to 3.25 per cent, and Serbia, whose officials may stay on hold amid mounting pressure to lift rates.

Data in the euro region include numbers pointing to the strength of Germany’s manufacturing base at the start of the year, encompassing both factory orders and industrial production. Economists predict a monthly increase for each report.

In the UK, monthly gross domestic product data may show only a small increase in January after a decline in December, a legacy of the impact of the omicron variant of the coronavirus that prompted restrictions at the end of last year.

South African data on Tuesday will likely show the economy grew by 4.8 per cent in 2021 and 1.6 per cent in the final quarter. The expansion was probably crimped by travel bans right before its summer holiday season due to the omicron outbreak, and surging gasoline prices.

On Wednesday, data from Ghana will probably show inflation in February breached the top of the central bank’s target band of 6 per cent to 10 per cent for a sixth straight month, adding to the case for a rate rise.

On the same day, the central bank of Mauritius is expected to keep its key rate on hold to support the recovery.

Bloomberg

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