Stocks around the globe were modestly higher in early trading this week. Improving COVID-19 trends and relatively upbeat earnings have provided a tailwind for risk assets despite looming inflation and geopolitical tensions. For the year, COVID-19 cases have declined roughly 80% from January’s peak.
On the data front, U.S. retail sales reported on Wednesday morning showed the biggest gain since last March, rising 3.8% for the month against a consensus estimate of 2.0%. The advance in sales underscores the resiliency of Americans’ demand for goods. An improving labor market has helped consumers continue to spend on things like cars and furniture despite decades-high inflation and a collapse in confidence. Looking past retail sales, investors will be tuned in to the Federal Reserve meeting minutes to be released on Wednesday afternoon. Investors will be paying particular attention to the Central Bank’s cadence regarding the future path of interest rate hikes and the reduction of balance sheet assets. Meanwhile, concerns remain over the risk of geopolitical tension in Ukraine and the impact of rising inflation on the economic recovery. Inflation continues to run well above target, as the Producer Price Index (PPI) climbed 1% in January, the most in eight months. The headline figure jumped 9.7% year-over-year, below last month’s record 9.8% annual pace. Core PPI (excluding food and energy) came in at a higher-than-expected 8.3% year-over-year.
In geopolitics, President Joe Biden said Tuesday that it’s still possible that Russia will invade Ukraine as Russian troops remain in a “threatening position,” while Moscow has repeatedly denied its plans to invade Ukraine. The U.S. appears to be committed to diplomacy but continues to threaten swift action if Russia attacks Ukraine.
Source: GSAM, Daily Upside, JPM, FactSet
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