Global companies reported stalling profits this week, which is not surprising, given the background of previous weeks of growth. As a result, the S&P500 index lost about 40 points in a week and will open on Friday at 4381 points, which is the largest weekly market decline in three months.
Investors have started worrying again that central bank actions will lead to a recession, especially in Europe. If everyone in the United States discusses words and hints from the Federal Reserve, then the UK was stunned by the Bank of England drastically raising its rate by 50 bp, reacting to inflation, which still refuses to abate. The situation with the cost-of-living crisis, which is now called the inflation disaster in the country, is much worse than in the EU and the United States, where inflation seems to have been brought under control. All this is combined with continuous industrial action across the Sceptered Isle, which continues to pay its price for Brexit.
Populism always comes at a cost. And it is not only developing markets that pay for it, but also countries as the UK, as it turns out. But the developing markets also had their share of fun. Turkey was again performing solo this week. There was supposed to be a decision on interest rates this week. After Erdogan appointed decent people in the financial sector, there was hope in the markets that the Turkish monetary policy would return to an adequate state and forget about the crazy theories of the “Turkish sultan.” And the key test was the decision on the rate, which had been kept at a very low level for a very long time against the backdrop of record-breaking inflation. The market expected radical steps that would demonstrate the true independence of monetary policy. Expectations for the rate ranged from 20% to 40%, given the severity of rampant inflation. The result was a half-measure: the rate went up, but only to 15%, lower than the most pessimistic expectations, demonstrating the half-heartedness of the new policy. And, as many Ukrainian reforms have shown us, half-heartedness doesn't work, and when common sense compromises with madness, common sense loses. As a result, the lira immediately reacted, reaching new lows. Whether investors still have hope that the Turkish economy has a chance will be seen later.
In Ukraine, all attention this week was drawn to London, where a veritable paratrooper regiment of Ukrainian officials and experts has landed. Another conference on Ukraine’s recovery was held there, giving many a chance not only to take selfies with world leaders, but also to legally leave Ukraine. In the end, basically a Lviv jazz festival took place in London, where the soloists were not leading world jazzmen, but leading world politicians. From a political point of view, the conference was successful, Ukraine took the first pages of all leading world media. At the same time, it seems that it was possible to move from the strategy of extinguishing fires to medium-term planning of support, primarily financial. As a result, financial assistance to Ukraine for 2023 increased by approximately $2.5 billion. Within the framework of financing for rapid recovery, which, of course, should be reflected in GDP dynamics. In the result, the Ukrainian segment of Eurobonds grew by one and a half points per week, continuing the previous growth on optimism about the Ukrainian economy. Therefore, the meetings in London were probably not in vain, because some major investors managed to break through to the conference and charge with optimism, if not from Ukrainian presentations, which were bold to the point of absurdity and therefore more likely to scare than impress, then from communication with people who make decisions both in Kyiv and in the largest capitals of the world. As for the restoration of Ukraine itself, nothing is clear yet, and already the umpteenth conference did not bring any clarity.
And one of the key issues, of course, is who will pay.
So far, the question of frozen Russian sovereign assets remains unresolved, although everyone talks about them constantly, including at the conference in London. If the prospect of “shaking down” a hypothetical Abramovich, no matter how much he resists, is absolutely obvious, then how to use the Russian Central Bank reserves is still unclear. The EU is constantly facing legal problems and is only ready to direct accrued interest to Ukraine, which is not bad either, but still far from implementation. In the United States, the congressional initiative to seize Russian assets for Ukraine’s benefit is still in its infancy. The domestic market remains stable, demonstrating that something can be stable in this world. Even despite the concerns about the grain agreement, which the Russians continue to sabotage.
P. S. Nothing is really work unless you would rather be doing something else.