Mid-Week Market Minute 03.09.22

Market Updates

Stocks traded solidly higher mid-week and recovered most of the losses from a sharp sell-off over the first two days of the week. The market’s main focus remains Russia/Ukraine as flows are being driven by possible progress toward a ceasefire deal ahead of scheduled talks on Thursday in Turkey. On Wednesday, Kremlin Press Secretary Dmitry Peskov noted sanctions by the West are making Russia “think carefully” about the situation and that Russia will continue talks with Ukraine, spurring fresh optimism for a peace deal. (Bloomberg). Sentiment also was helped mid-week after a top aide to Ukrainian President Zelenskyy said the country is open to discussing Russia’s demand of neutrality as long as it’s given security guarantees. Markets are bracing for a global inflation shock exacerbated by increasing commodity prices given the Russia-Ukraine conflict. Russia’s outsized role in commodities may constrain already tight supply, boosting prices. Economically, implications may be more regional as Russia accounts for just 3% of global GDP, though there may be spillover effects from trade, energy, and financial conditions. Commodity costs underline the inflation challenge for the Fed, which is expected to hike interest rates by 25 basis points at its meeting next week (March 15-16). Futures markets are now pricing in a total of six to seven separate 25 bp (0.25%) rate hikes over the course of 2022. Meanwhile, investors will look for further inflation clues from the latest consumer price (CPI) report, due out on Thursday. In the bond markets, interest rates continue to be volatile, with the 10-year Treasury trading at 1.90% mid-week, after trading at a yield of 1.70% on Monday.

Source: Bloomberg, GSAM, Daily Upside, JPM

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