With little new macroeconomic data to digest, the financial markets continued in their rather fragile “mood” of recent weeks, with the only short-term catalyst being the outcome, or not, of the Russian-Ukrainian crisis.
On this subject, it is obviously always complicated to anticipate the outcome of geopolitical tensions even if logic, or common sense, would like a military intervention to be avoided. If the diplomatic discussions have not completely failed, as evidenced by the announced meeting (then tempered by Russia) between J. Biden and V. Putin as tensions increased sharply last week with bombardments in the separatist zones, the two camps blaming the other. At the same time, the "true-false" withdrawal of Russian troops massed on the border did not help to reduce tensions. If the essence of a threat is to be credible, the Russian president manages it rather well. V. Putin is undoubtedly seeking in short, to maintain a strong influence in the former countries of the USSR. However, it is not certain that it is in Russia's interest to nip the new Nord Stream 2 gas pipeline at the bud. It should be noted that on a six month horizon the current tensions constitute and excellent buying opportunity and that a large part of the decline since the beginning of the year is due to the synchronized monetary tightening of the main central banks.
On this other front, no data, no progress... central banks are now acting in reaction to the publication of macroeconomic figures. The FOMC minutes, unlike last month's, offered us little new information from Jerome Powell's post-meeting speech. The minutes reiterated the "data-dependent" side of the Fed, with no marked debate on a 50 bps increase in key rates from March, which tended to lower investors' expectations of a double rate hike at the next meeting. Several members of the FOMC have confirmed this trend. John Williams, President of the New York Fed, considers that there is no motives for a "big step" on key rates for March, seeing instead a regular and adjustable increase according to the data. The observation thus always remains the same: an economy in sustained growth with persistent tensions on inflation and the labor market. This observation was confirmed by the little data published across the Atlantic last week. Retail sales and industrial production rebounded above expectations in January, after the month of December impacted by the Omicron variant. Import prices continued to rise (+10.8% year-on-year vs. +10% expected).
Finally, note the very good publications on activity indicators in the euro zone this morning, confirming the ECB's growth assumptions which should also point to an early exit from the accommodative monetary policy.
