Will Commodity Prices Drive Inflation Even Higher?

Real Vision: Finance & Investing

Real Vision

Business News, News, Investing, Business

4.1 • 1.1K Ratings

🗓️ 15 March 2022

⏱️ 37 minutes

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Summary

It’s safe to say the macro environment is unsettled right now, to an extent not seen in decades, and financial markets are correspondingly volatile. Crude oil prices are now down nearly 30% from recent highs, as investors weigh the demand impact of new COVID-19 lockdowns in China against supply constraints owing to the Russia-Ukraine war. Wheat has also backed off but is still up nearly 40% since Russia invaded Ukraine. The Labor Department reported this morning that the Producer Price Index for February was up 10% year over year and 0.8% month over month, as recent spikes for energy and food inputs promise a “faster for longer” rate of rise. Still, the major U.S. equity indexes were all trading more than 1% higher through midday. This is all prelude to Wednesday’s monetary policy announcement by the Federal Open Market Committee. Inflation is the main enemy for the Federal Reserve. But global stress – heightened by reported talks between Saudi Arabia and China about the former accepting the yuan in payment for oil rather than the U.S. dollar – must be weighing on Jerome Powell and company. Tony Greer, founder of TG Macro and editor of The Morning Navigator, joins Warren Pies, founder of 3Fourteen Research, to discuss the impact of war in Eastern Europe on commodity and financial markets and how policymakers are likely to try to manage it all. Want to submit questions? Drop them right here on the Exchange: https://rvtv.io/3KKXSai Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

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0:00.0	Welcome aboard this Air France podcast message. Air France and its crew invite you to discover
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0:34.9	Welcome to the real vision daily briefing. It's Tuesday, March 15th, 2022. I'm Warren
0:41.0	Pies, founder and strategist at 314 Research, joined today by Tony Greer, editor of the morning
0:48.0	navigator Tony, how are you doing? Great Warren. How you doing today? Good. We have a
0:53.2	lot to talk about. So let's get to it. Topics that I saw bouncing today and really catching
1:00.0	my eye, PPI, hitting 10% level, Fed day tomorrow, obviously. Oil retracing that huge move from
1:07.8	130 back below 100. Obviously some ancillary issues like the rumors that Saudi Arabia is going
1:14.1	to diversify out of US dollars for the oil they sell. My figure we could start with oil
1:20.1	since our last conversation ended there. What do you make of this big retracement we've seen?
1:27.3	Warren, I think this is the opportunity like I wrote about this morning to fill our boots,
1:31.7	right? And that's a that's a term that we've always used in commodities on the floor,
1:36.6	et cetera, et cetera, when something's coming to you and you get a chance to bid for it and buy it
1:41.3	because there's actually selling around. They're selling around because last week a lot of the
1:46.6	commodity markets seem to have met their Icarus print as we say in commodity trading where they
1:53.2	kind of fly too close to the sun. Usually their path gets too vertical, their wings melt and they
2:00.4	fall back to earth. And we saw all that start last week in the physical commodity space,
2:07.3	but the great rotation was still on where equity traders were still buying natural resources
2:13.5	and just unloading technology. What we're seeing this week is they're finally getting to some of
2:20.5	the natural resources stocks since the commodities have backed all the way off the highs. So that's
	...

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