The Day at a Glance | February 16 2022

The Top

*Inflation in China surprised to the downside.

*Retail sales in the U.S. showed a strong rebound in January (3.8% annual vs 2%e.); a sign of strength in consumption.

*Jens Stoltenberg, NATO Secretary General, assured that there is no evidence that Russian troops are withdrawing from the border with Ukraine.

*The FED`s meeting minutes will be revealed today; markets will focus on signs regarding the increase in rates and the reduction in the balance of assets.

*G-20 Financial Stability Board warns that digital assets could threaten the world`s global financial stability; it suggests implementing regulations.

*Germany, Austria, Switzerland and the Netherlands withdraw COVID-19 restrictions; France will follow in the next few weeks.

Economic environment

Inflation in China surprised to the downside. Inflation for producers and consumers surprised to the downside in China. Inflation for producers fell to its lowest level in 6 months (9.1% annual vs 10.3% Dec.), and for consumers, the figure decreased to a 0.9% annual rate (vs 1.5% Dec.). The decrease in coal and steel prices significantly contributed to lower inflation for producers, while for consumers, food and energy prices weakened. Underlying inflation remained at an annual 1.2%, where it`s been since November. The data confirms that disruptions in supply in China`s economy at the end of 2021 have continued easing, and that domestic demand is still slow, which keeps inflation for consumers low. The drop in prices for producers is especially good news for the global economy since it entails less pressures for Chinese manufacturers to increase prices on exported products. Additionally, lower inflationary pressures in China grant authorities more fiscal and monetary room for maneuver as the economy goes through a strong slowdown due to the real-estate sector`s crisis. Nevertheless, the room for maneuver is closing as the FED increases interest rates and creates capital outflow risks in China and weakens the Yuan. Inflation for producers is expected to gradually decrease in China by the end of 2022 towards a 3.9% annual level. At the moment, this doesn’t seem to be an upwards risk factor for international prices.