Start each business day with our analyzes of the most pressing developments affecting the markets today, along with a curated selection of our latest and most important news on the global economy.
Today is Monday, April 4, 2022and here is today’s essential intelligence.
Global macroeconomic and credit conditions face a confluence of risks
After starting the year strong, the global economy and credit markets now face downside risks from the Russia-Ukraine conflict, lingering inflationary pressures, looming interest rate hikes and continued of the pandemic.
Global macroeconomic and credit conditions are is about to experience significant upheavals geopolitical, confidence and market shocks, according to the latest economic and credit outlook from S&P Global Ratings.
Direct disruptions to energy, agriculture and other trade and capital flows caused by the Russian-Ukrainian conflict have caused energy and food prices to skyrocket, further complicating chains supply and increases inflationary pressures, and creates new challenges for central banks as aggressive monetary policy tightening approaches. These factors play out as the pandemic continues, with many economies managing to live with the virus while others continue to implement low-tolerance containment practices.
S&P Global Economy now expects global GDP growth of 3.6% this year after lowering its forecast due to these converging risks by 0.6 percentage points from its previous forecast.
“Although the global economic impact of Russia’s invasion of Ukraine has been modest so far, there is no reason to be complacent. The longer the conflict drags on, the higher the risks. The buffers accumulated by households during the worst of the pandemic are considerable, but they will not last forever,” Paul Gruenwald, chief global economist at S&P Global Ratings, said in the second quarter global economic outlook. “The fall in confidence could accelerate if the conflict and the economic difficulties associated with it drag on. The worst of the economic impact of the conflict is therefore probably yet to come.
While the start of 2022 marked a turning point in the positive credit dynamics seen since last year, global credit conditions face significant risks the potential escalation of the Russian-Ukrainian conflict or any extension of sanctions on gas and oil exports to Europe; central banks’ struggle to control inflation without stifling economic growth, leading to higher borrowing costs, especially for lower-rated credits; continued supply disruptions and high commodity prices are compressing profit margins; and new COVID variants, according to S&P Global Ratings.
“Although pale in comparison to the tragic human costs, the adverse effects of the Russian-Ukrainian conflict on global economic and credit conditions are increasingly pronounced, with measurable implications for our macroeconomic forecasts and credit ratings,” he said. declared S&P Global Ratings Global Head of Analytical. Research and Development Alexandra Dimitrijevic said in the outlook for second-quarter global credit conditions. “The widening of credit spreads in major markets suggests that investors are becoming somewhat more risk averse. In addition, the uncertainty surrounding the crisis and its ramifications, as well as the acceleration of monetary policy tightening, have led to a pause in debt issuance at the lower end of the credit spectrum.The growing challenges will likely weigh on the credit outlook for the rest of the year, depending, in large part, on how the conflict unfolds.
Written by Molly Mintz.
Economic research: The March jobs report: the wind at your back
Non-farm payrolls in the United States rose by 431,000, with a net gain of 95,000 jobs over the previous two months, according to the Bureau of Labor Statistics (BLS) March employment report. This points to a strong economy. The report also puts the Fed on solid ground to act, confident that the US economy can absorb tighter Fed policy and continue to grow.
—Read the full report of S&P Global Ratings
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Commodities continued to climb in March last month
The S&P GSCI posted its best quarterly performance in decades as inflation continued to post the highest numbers in decades. Commodities rose another 9.63% in March after rising 8.8% in February. Geopolitical conflicts and inflation were the two main reasons for the general rise in commodity prices. The S&P GSCI Energy remained in the lead last month, up 12.47% in March. The uncertain supply situation of Russia, the world’s largest exporter of natural gas and third largest oil exporter, has led the United States to release a record amount of emergency oil from the Strategic Petroleum Reserve. Germany, very dependent on Russian energy, has launched an emergency plan that could lead to energy rationing.
—Read the full article from S&P Dow Jones Indices
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Listen: Resurgence of COVID-19 Threatens Asian Oil Demand Recovery
The sustained recovery in oil demand in Asia over the past few months could suffer a further setback following the outbreaks of COVID-19 in China and other countries in the region. While the sharp drop in consumption seems distant at this point, markets are watching closely whether major Asian oil-consuming nations resort to more lockdowns to stem the spread of the pandemic. In the latest episode of Oil Markets, Sambit Mohanty, Asia Energy Editor at S&P Global Commodity Insights; Jonathan Nonis, Associate Editorial Director for Asian Petroleum Products; and JY Lim, Advisor for Asia-Pacific Oil Markets, discuss the possibility of a new round of demand destruction for petroleum products, Asia’s crude buying strategy in the face of fears of a slowdown in demand and the impact on trade flows.
—Listen and subscribe to Oil Markets, a podcast by S&P Global Commodities Outlook
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Listen: Unpacking the implications of the SEC’s proposed climate disclosure rule
In the latest episode of ESG Insider, hosts Lindsey Hall and Esther Whieldon explore the potentially significant implications for investors, companies and climate disclosure globally. To help understand the SEC’s proposal for auditing and attestation requirements, they speak with Maura Hodge, head of IMPACT and ESG auditing at professional services firm KPMG. They also discuss the challenges of measuring indirect Scope 3 emissions with their colleague, Dr. James Salo, who leads environmental research and ESG modeling at S&P Global Sustainable1. And to explore the legal implications surrounding the proposal, they speak with Mellissa Duru, special counsel at law firm Covington & Burling and co-vice president of the firm’s ESG practice. Mellissa previously worked at the SEC in its Corporate Finance division and as a senior adviser to former commissioner Kara Stein on SEC ESG-related regulatory policy.
—Listen and subscribe to ESG Insider, a podcast from S&P Global Sustainable1
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Energy and raw materials
Feature: US airlines are casting a wider net in search of a sustainable supply of aviation fuel
As U.S. airlines seek to ensure a sustainable supply of aviation fuel to meet their 2030 greenhouse gas emission reduction goals, many are looking beyond suppliers who produce SAF using traditional raw materials such as hydrogenated vegetable oils and tallow. With more renewable diesel and SAF projects starting up, renewable feedstock supplies are tightening, driving up costs. The price of major soybean oil feedstocks averaged 75.86 cents/lb in March, compared to an average of 68.22 cents/lb year-to-date, according to S&P Global’s Platts valuations. Commodity Insights.
—Read the full article from S&P Global Commodities Outlook
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Technology and media
Big fines may scare off big tech, but enforcement in digital markets is key – Experts
Experts believe that while new European regulations associated with the Digital Markets Act could have a significant impact on affected businesses, enforcement will be the main determinant in ensuring the laws are effective. The European Council and European Parliament on March 24 approved the Digital Markets Act, or DMA, a framework of new initiatives aimed at curbing the dominance of Big Tech companies and related entities in Europe’s digital landscape. The DMA’s measures aim to reduce the power of digital “gatekeepers”, which are companies seen as being too market-focused, thereby preventing competitors from entering a market. DMA does this by determining which companies can interact on or alongside their platforms and how they can operate.
—Read the full article from S&P Global Market Intelligence
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