Russian forces have begun their expected counter offensive in the eastern Ukrainian regions of Donetsk and Luhansk, according to Kyiv. This comes as the Russian’s have increase their bombardments against locations across central and eastern Ukraine – in addition to a missile strike on the western city of Lviv yesterday. In the face of continued Russian aggression, Volodmyr Zelensky has stated “no matter how many Russian soldiers” Ukraine will defend the Donbas region – and while it remains challenging to predict on how many Russian troops may have amassed there, The Telegraph are estimating a figure of around 50,000 to 60,000 could be likely based on Western intelligence sources. Therefore, as the counter offensive begins in what the Moscow have declared as two ‘independent sovereign states’, it is expected that fierce fighting will continue in the region.The BBC has more:
World Bank Growth Forecasts
Citing the conflict in Ukraine, yesterday the World Bank slashed global growth forecasts for 2022 from 4.1% down to 3.2%. The World Bank President, David Malpass stated that European and Central Asian output would be severely affected by the conflict, which has exacerbated supply chain issues and has led to soaring energy, commodity, and food prices. This rising cost of food is of particular concern for the World Bank, especially considering food scarcity issues across many developing counties. As such, Malpass announced that “Over the next few weeks, I expect to discuss with our board, a new 15-month crisis response envelope of around $170 billion to cover April 2022 through June 2023.” A proportion of this package would also help support Ukraine and countries such as Poland which have hosted refugees and although not finalised would be roughly a similar size to the World Bank’s $160bn Covid response measure.
Concerns over global growth played into investor sentiments on Wall Street yesterday with The Dow Jones closing down 0.11%, while the S&P 500 dropped slightly by 0.02% and the Nasdaq Composite down 0.14%. Although it is worth noting that these losses may have been slightly subdued the Bank of America reporting a lower than predicted decline in profits, which sent some bullish undertones on the state of global dealmaking, especially given that some other major corporate earnings reports are released this week. Nevertheless, The World Bank’s forecasts saw Brent prices rise 1.3% as it reconfirmed investors concerns over the prospect of hindered supplies. This came concurrent to Libya’s National Oil Corp making an announcement on the unplanned outages of many of its oil facilities. The pessimistic outlook on Global growth also saw safe haven assets such as gold see some appreciation, with the precious metal rising to a one-month high yesterday and the DXY index edging closer to 101.
China’s Economic Growth
Growth concerns are also being expressed for China, whose retail sales indicate a 3.5% fall over March – much worse than forecasters had predicted. Existing concerns over growth – much of which was bought about by worries around the health of the Chinse property sector – have been exacerbated by their economic capital, Shanghai (and its 25m residents) going into lockdown. Accordingly, doubts are being raised over whether President Xi’s will meet his target of 5.5% growth this year especially when considering the Zero tolerance covid measures, rising unemployment (which recently hit 5.8% – its highest since May 2020) and their precarious property sector.
This week is a little light on primary economic data, however tomorrow the IMF will be meeting to discuss the heath of the global economy and discuss measures to address the war in Ukraine and its global socio-economic implications. Tomorrow, CPI data is released from Canada, following its decision to raise interest rates by 50bp last week in addition to inflation data from New Zealand. And on Thursday, the markets will be paying close attention to respective speeches from Powell, Bailey and La Guard.
Have a great day.