Advancing

Ukraine’s forces continued their rapid advance in the Kharkiv region on Sunday, exploiting an extraordinary collapse of Russian defenses and raising the question of how far they can go. Unconfirmed reports overnight suggested Kyiv’s troops had taken towns Velykyi Burluk and Chkalovske, and all eyes are on strategically located Izyum. The advance represents Ukraine’s biggest victory since they pushed Russian troops away from the capitol Kyiv in March and the past few days have been termed among the most consequential of the now 200-day invasion. Meanwhile, French President Emmanuel Macron urged Russia to withdraw “heavy and light” weaponry from around the Zaporizhzhia nuclear power plant during a “frank exchange” with President Vladimir Putin on Sunday.

Jobs vs Inflation

Treasury Secretary Janet Yellen said she remains hopeful the US economy can avoid recession, but added that Americans understand the need for the Federal Reserve to conquer inflation. “My hope is we will achieve a soft landing, but Americans know it’s essential to bring inflation down and, over the longer run, we can’t have a strong labor market without inflation under control,” Yellen said Sunday in an interview on CNN. Those remarks align her with Fed Chair Jerome Powell, who said last week that he and his policy making colleagues at the central bank are “strongly committed” to taming inflation, which remains near a 40-year high.

Investor Stampede

How Europe will surmount its mountain of troubles is anyone’s guess — and investors aren’t sticking around to find out. Money managers yanked $3.4 billion from European stock funds in the week through Sept. 7, taking total outflows in the past six months to $83 billion, according to Deutsche Bank citing EPFR Global data. Among those fleeing are BlackRock and the region’s largest asset manager Amundi. Analysts at Bank of America and JPMorgan slashed year-end forecasts for the Stoxx 600 and Euro Stoxx 50 respectively. Europe’s woes have grown particularly acute in recent months as the region stares down the threat of a recession just as its central bank embarks on an aggressive campaign to tame inflation.

Painful Reset

Around the world, soaring borrowing costs are squeezing homebuyers and property owners alike. From Sydney to Stockholm to Seattle, buyers are pulling back as central banks raise interest rates at the fastest pace in decades, sending house prices falling. Meanwhile, millions of people who borrowed cheaply to purchase homes during the pandemic boom face higher payments as loans reset, but just how exposed borrowers are to rising rates varies notably by country. Rising rates also are pressuring property companies that borrowed heavily on the bond markets to finance their operations, leaving investors increasingly concerned about their ability to refinance that debt. 

Coming Up…

European shares are poised to follow US and Asian stocks higher as a rebound in risk assets continues. ECB policy makers kick off a busy week of speeches as Executive Board member Isabel Schnabel delivers remarks at the central bank’s annual research conference. The International Atomic Energy Agency starts a week-long board of directors’ meeting in Vienna, with Ukraine’s nuclear plants and a revival of the Iran deal among talking points. Expected data include Danish and Portuguese inflation, as well as industrial output from the UK and Italy. The Emmy Awards take place in Los Angeles. Oracle reports results on a light day for earnings.

—————————————

(Source: Bloomberg, Sept. 12-2022)