Inflation worries and Russia/ Ukraine fears weigh on stocks


Macroeconomic/ geopolitical developments

  • Another inflationary shock to the upside with the release of the US CPI data on Thursday that saw a print of 7.5% on an annual basis, above consensus estimates and at its highest level for 40 years, since 1982.
  • The surging inflation data from the US (and globally so far in 2022) has reinforced the expectations of an even more hawkish reaction from the major, global central banks.
  • The more hawkish members of the FOMC are now indicating a possible 0.5% increase at the March meeting with Goldman Sachs now predicting 7 rates hikes this year, one at each meeting in 2022.
  • Although the European Central Bank and President Christine Lagarde pivoted towards a tightening stance at their early February meeting, in subsequent comments ECB members including Lagarde have tried to calm market fears of a significantly more hawkish shift.
  • The end of last week saw a “risk off” theme reinforced by indications from the US that conflict between Russia and Ukraine could be imminent.

Global financial market developments

  • Again, global stock averages were extremely erratic last week, but concerns over the possible conflict between Russia and Ukraine, alongside global yields spiking higher saw a weak close to the week, led by the US indices and in particular the tech sector.
  • Higher yield pressures extended through last week, with US Treasury yields at multi-year highs and the US 10yr Note breaching the psychological 2% level, though yields did fall on Friday with a safe haven bond rally given worries over the possible conflict between Russia and Ukraine.
  • The US Dollar rallied, undoing some of the prior week’s losses, with a safe haven bid, plus benefiting from the higher US yields and wider yield differentials.
  • Gold surged, even with a firmer US Dollar, as a safe haven and inflation hedge.
  • Oil again extended its rally into 2022, to yet another new multi-year high.
  • Copper tried to breakout to the upside, but fell at the end of the week, but has a more positive bias in broader range.

Key this week

  • Geopolitical focus: Closely watching for military developments on the Ukrainian/ Russian border.  
  • Central Bank Watch: The only Central Bank activity of note are the release of the RBA and FOMC Minutes on Tuesday and Wednesday respectively.
  • Macroeconomic data: the UK Employment and CPI data, alongside US Retail Sales are the standout data points for the week.
DateKey Macroeconomic Events
14/02/22Nothing of note
15/02/22RBA Minutes; Japan GDP; UK Employment report; EU GDP; German ZEW survey; US PPI
16/02/22UK CPI; US Retail Sales; Canada CPI; FOMC Minutes
17/02/22Australia Employment report
18/02/22Japan CPI; UK Retail Sales; Canada Retail Sales

Editor in chief

Steve Miley is the Market Chartist and has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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