Ukraine talks, inflation, and monetary policy.Ukraine MeetingThis morningâs meeting between the foreign ministers of Russia and Ukraine in T
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Ukraine talks, inflation, and monetary policy. Ukraine Meeting This morningâs meeting between the [foreign ministers]( of Russia and Ukraine in Turkey, the most senior officials to hold in-person talks, made little apparent progress. Russia said it will continue attacks until its goals are met, according the Ukrainian foreign minister. The House of Representatives approved legislation [barring]( U.S. imports of Russian oil and passed a $13.6 billion package to respond to the invasion, while the Biden administration is considering imposing [sanctions]( on Russiaâs state-owned atomic energy company. [Rio Tinto]( joined the list of companies severing ties with Russia.
Material Inflation Wild swings in raw material prices make inflation data, due in the U.S. later, [harder to predict](. The median Bloomberg survey estimate pointing to a 7.9% increase year-on-year and a 6.4% annual increase excluding food and energy. Economists are now saying the number could peak close to 9% in the coming months. While the focus has primarily been on [energy]( prices, [nickel](, wheat, [palm oil](bbg://news/stories/R8FIW0DWX2QO) and gold are just some of the other commodities that saw volatility increase since Russia invaded Ukraine. Monetary policy The European Central Bank faces a [balancing act]( at todayâs policy meeting. While the war and the sanctions are likely to damp economic activity and crimp the euro zoneâs growth potential, the ECB will also be mindful of the implications for already-elevated [inflation]( from those surging commodity prices. The policy decision will just be the appetizer for next week when the Federal Reserve will almost certainly raise its benchmark to quell inflation that is running at the [fastest pace]( in decades. The Bank of England faces a similar prospect, while the Swiss National Bank is likely to emphasize that an exit from negative rates is premature. Stocks mixed Global equities are a mixed bag today as Asian caught up with yesterdayâs rally while Europe and the U.S. are focused on the ECB and CPI. Overnight, The MSCI Asia Pacific Index rose 2.5%, in the biggest move since June, 2020 while Japan's Topix index rose 4%. In Europe the Stoxx 600 Index was 1.1% lower at 5:50 a.m. Eastern Time, weighed down the most by carmakers and banks. S&P 500 futures and Nasdaq 100 [contracts dropped]( about more than half a percent. The U.S. 10-year Treasury yield was at 1.932%, [oil rallied]( and [Bitcoin dropped](. Coming up... The ECB rate decision is at 7:45 a.m. with the press conference 45 minutes later. U.S. inflation data for February will be published at 8:30 a.m. The jobless claims print, due at the same time, is expected to be 215,000. The U.S. will sell $20 billion of 30-year bonds at 1:00 p.m. The February U.S. Budget Statement is at 2:00 p.m. After-market earnings releases are due from JD.com Inc and Oracle Corp. What we've been reading Here's what caught our eye over the last 24 hours. - Odd Lots: hereâs what [cyber war with Russia]( may actually look like.Â
- Wild ride in China stocks triggers [memories of 2018]( meltdown.
- U.K. freezes Abramovichâs assets putting [Chelsea future in doubt](.Â
- Putin gets in the way of âbuy the dipâ: [Mohamed A. El-Erian](.
- Gundlach warns U.S. [inflation may hit 10%](bbg://screens/R8FYGJT0AFB4), forcing Fedâs hand.
- An elite sport plagued by sex abuse is [turning on itself](.Â
- What your Wordle starter word [says about you]( And finally, hereâs what Joeâs interested in this morning Good morning. Itâs CPI day. At one point, which feels like ages ago, there was some talk and reason to hope that this month might mark the peak in headline inflation readings. But it appears weâll have no such luck, largely thanks to the surge in oil and other commodity prices. Economists are looking for a headline number of 7.9%. However, Andrew Husby and Anna Wong of Bloomberg Economics, see the number hitting 8%, with potential for it to rise above 10% in the months ahead. One of the ironies for the oil industry is that during the last U.S. administration, which was rhetorically much more âproâ domestic production, the industry lost a boatload of money due to unprofitable overdrilling. Now, we have an administration that talks much more about renewables, and weaning ourselves off of fossil fuels, and the industry is making money at a historic clip. The reluctance to drill (for whatever reason) is turning into a free cash flow gusher (no pun intended) for the operating oil companies. Obviously, thereâs a lot of pressure on The White House to do something to ramp up domestic production, but itâs not obvious what policy levers it actually has. It could change its tone or something like that. But that doesnât address the main issue, which is that investors have lost a ton of money over the last decade by expanding too fast, and now thereâs (understandably) a course correction. That being said, itâs worth reading [this proposal]( from Alex Williams, Arnab Datta, and Skanda Amarnath at Employ America, on using the Strategic Petroleum Reserve to both lower the immediate price of oil, while also encouraging more domestic production. We tend to think of the SPR just in terms of releasing oil into the market to (temporarily and meekly) depress prices. But of course, the SPR also needs to be replaced. Williams, Datta, and Amarnath propose taking advantage of the fact that oil futures for immediate delivery are way higher than the out months, signaling an extreme tightness in the market. The basic idea here is a two-step. Yes, you sell oil from the SPR in order to depress current prices, but the administration could also promise to replenish the SPR so that the outmonth prices have a guaranteed bidder, thus giving piece of mind to investors reluctant to finance new drilling and production. The details are more complicated than this, but can be [read here](. They also propose invoking the Defense Production Act in order to help alleviate supply chain bottlenecks (shortages of steel pipe, frac sand, etc.) that may also hamper new production. A lot of the discussion around oil seems to imply that the main thing The White House should do is say nicer things about oil. But the main issue seems to be finance, not feelings. And through the SPR, there are ways to use cash to help bring the market into balance. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Special Daily Brief: Russia's Invasion of Ukraine [Keep up with the latest news]( on the Russian invasion of Ukraine, one of the worst security crises in Europe since World War II. Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Before itâs here, itâs on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals canât find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Five Things - Americas newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox.
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