Market Update

As the week concluded, several significant markets ended on a high note. With the onset of British Summer Time just around the corner, both the weather and inflationary pressures are intensifying.
The inflation reading for February, reported on Wednesday, showcased a 6.2% year-on-year increase. As highlighted last week, this inflationary spike, exacerbated by the unexpected Ukrainian crisis, was anticipated by markets, the Bank of England, and by our team. Even though inflation's pinnacle is anticipated to be more pronounced and delayed than initially predicted, the Bank of England foresees a substantial reduction in the subsequent years.
Recent times have seen a consistent uptick in inflation across the UK, US, and Eurozone. During Monday's press conference, ECB President Christine Lagarde ruled out the possibility of stagflation in the Eurozone, asserting, "Even under the gravest scenarios, considering prolonged warfare and a complete boycott of gas and petrol, we project a growth rate of 2.3%."
Following recent interest rate hikes of 0.25% in both the UK and the US, Lagarde emphasized the contrasting economic contexts of Europe and the US. Europe is farther from a regular interest rate setting compared to its global counterparts. Moreover, while the Ukrainian situation influences the monetary decisions of both central banks, it will have a more profound effect on Europe than on the US.
Although the week's primary domestic headline revolved around the Spring Statement, it remained relatively inconsequential for the markets.
The subjects of oil and gas have been recurrent in our discussions, especially since Russia's invasion of Ukraine. The erratic behavior of these commodities is something we've stressed and expect to persist.
In reaction to Russia's actions, Western countries have committed to diminishing their dependence on Russian energy. While this alarmed markets initially, leading to rising oil and gas prices, the Western resolve appears to be steadfast and long-term.
This situation is not about a shortage of energy supply but rather a reconfiguration of energy sources. The US and EU unveiled plans to mitigate the EU's dependency on Russian energy, with the EU presently importing nearly 40% of its natural gas from Russia. A new agreement on liquefied natural gas (LNG) ensures that the US will supply an added 15 billion cubic meters of LNG to the EU this year, which will surge to 50 billion by 2030. Both parties will cooperate on gas storage across Europe and, importantly, develop the requisite infrastructure for LNG reception.
The sanctions against Russia have further intensified Western momentum towards sustainable energy alternatives for the future.
As we look forward to the upcoming week, we'll be closely monitoring key indicators such as GDP figures from the US and UK, China's PMI data, Eurozone inflation, and US employment stats.