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Since the release of PPI inflation data on Thursday, fears of the US Federal Reserve returning to a more aggressive pace of rate hikes have returned to financial markets, especially given the strong labor market and GDP growth. All of this was fueled by relevant comments from Fed officials. Cleveland Fed Chair Loretta Mester said Thursday that US interest rates would have to rise above 5% and stay there for a long time to keep inflation down significantly. St. Louis Fed President James Bullard often considered the most hawkish official at the central bank, also said Thursday that he supports further rate hikes. Bullard added that he would support a 50 basis point increase at the next Fed meeting on March 22. As a result, the US stock market came under pressure late last week. At the close of the stock market on Friday, the Dow Jones index (US30) increased by 0.39% (-0.18% week-to-date), while the S&P 500 Index (US500) fell by 0.28% (-0.43% week-to-date). Nasdaq Technology Index (US100) lost 0.58% on Friday (+0.24% for the week).

The Fed will release the minutes of its January meeting on Wednesday. The minutes may give investors some indication of the appetite for a bigger hike at the Fed's upcoming March meeting after recent comments from some policymakers indicating support for such a move.

The disappointing fourth-quarter reporting season is coming to an end. The results from the major retailers will provide insight into the strength of consumer spending amid a surge in prices, which is an important topic for investors. Walmart (WMT), the world's largest retailer by sales, along with home improvement giant Home Depot (HD), are due to report Tuesday. The retailers' extraordinarily high earnings could raise fears of a tougher Fed response.

Stock markets in Europe were mostly down on Friday. German DAX (DE30) decreased by 0.33% (+1.04% for the week), French CAC 40 (FR40) lost 0.25% (+2.80% for the week), Spanish IBEX 35 (ES35) added 0.06% (+2.17% for the week), British FTSE 100 (UK100) closed Friday down by 0.10% (+1.55% for the week).

The war in Ukraine will cost Germany's economy about 160 billion euros ($171 billion), or about 4% of its gross domestic product, the German Chamber chief said. An Allianz Trade study says the German industry will pay about 40% more for energy in 2023 than it did in 2022, before the crisis caused by Russia's February 24 invasion of Ukraine. Germany, which has relied on relatively cheap Russian pipeline gas for decades, now has particularly high energy prices compared to the United States, which has its own natural gas reserves, while France has abundant nuclear energy.

New concerns about inflation and rising rates have forced oil traders to close their long positions, especially after they became wary of an oversupply forming as a result of inventory accumulation. Analysts believe that the data on Chinese imports, which should support the oil rally, is likely to appear no earlier than two weeks.

Gold prices fell for the third week in a row after Fed officials expressed fears of further rate hikes. Gold and silver are inversely correlated to the dollar index and government bond yields. Rising rates tend to raise bond yields, so gold prices are always under pressure during a tightening cycle.

Asian markets were mostly down last week. Japan's Nikkei 225 (JP225) decreased by 0.14% for the week, China's FTSE China A50 (CHA50) fell by 1.56% for the week, Hong Kong's Hang Seng (HK50) ended the week down by 0.91%, India's NIFTY 50 (IND50) gained 0.62%, and Australia's S&P/ASX 200 (AU200) ended the week 1.17% negative.

In China, personnel changes in government agencies and major financial regulators are approaching. The question of who will lead the People's Bank of China is back in the spotlight. The new governor will have to lead the central bank in turbulent times, helping the economy get back on its feet after the disorderly reopening of the economy and dealing with the worst real estate slump in history to maintain financial stability. Another key task for the new leader will be to advocate the central bank's views to the government since the PBoC is not an independent institution but is accountable to the State Council.

The Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision on February 22. Some economists speculate that this will raise the cost of borrowing by 50 basis points to 4.75%.

In the commodities market, futures on cocoa (+6.6%), coffee (+6.47%), and copper (+2.75%) showed the biggest gains last week. Futures on natural gas (-9.98%), lumber (-8.58%), sugar (-8.11%), orange juice (-7.5%), cotton (-4.55%), WTI oil (-3.96%), gasoline (-3.9%), Brent oil (-3.75%) and platinum (-3.26%) showed the biggest drop.

• S&P 500 (F) (US500) 4,079.09 −11.32 (−0.28%)
• Dow Jones (US30)33,826.69 +129.84 (+0.39%)
• DAX (DE40) 15,482.00 −51.64 (−0.33%)
• FTSE 100 (UK100) 8,004.36 −8.17 (−0.10%)
• USD Index 103.88 +0.03 (+0.02%)
   

Important events for today:

• China PBoC Prime Rate (m/m) at 03:15 (GMT+2).
• Eurozone Consumer Confidence (m/m) at 17:00 (GMT+2);
• New Zealand Producer Price Index (q/q) at 23:45 (GMT+2).

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