Video News US Producer Price Index jumped 10% YoY in February… “Keeping an all-time high”
The US producer price index (PPI) rose 0.8% in February from the previous month and 10% year-on-year. Year-over-year growth was in the double digits, suggesting that inflation is likely to continue. The market consensus was 0.9% MoM and 10% YoY.
Energy was the main driver of inflation. As the surge in oil prices and raw material prices due to the Ukraine crisis was not reflected, there are many estimates that the pressure on inflation will increase in the future. The reason to pay attention to the recent economic indicators is that the FOMC meeting in March is just around the corner. The first rate hike in three years appears to be almost certain, which is likely to add even more momentum. The market now believes the Fed is most likely to raise rates by 25 basis points.
In this regard, Goldman Sachs also said that it sees 25bp as the most likely. Some Fed members argued that their argument for a 50bp rate hike in March did not take into account the fact that the war created so much uncertainty. It also maintained its previous forecast that the Fed would raise rates by 25 basis points each time in the remaining seven FOMCs this year, including this one. He also predicted that there would be four more rate hikes in 2023.
Intel to start investing in semiconductors in Europe… $36 billion invested
Intel announced a large-scale investment plan for semiconductor production and R&D in Europe of 80 billion euros, or about 110 trillion won in Korean currency, over the next 10 years. The initial investment is 33 billion euros, which is 36 billion dollars, or more than 45 trillion Korean Won. Specifically, the state-of-the-art semiconductor plant to be built in Germany will cost €17 billion and Ireland will cost €12 billion. A research and development center will be built in France, and a packaging and assembly facility will be built in Italy. In Poland, we expand our experimental facilities and establish a joint center with the Barcelona Supercomputing Center.
If successful, the competition for semiconductor independence in Europe against Asia is expected to intensify. Factory establishment will begin in the first half of 2023, and full-scale production will begin in 2027. Intel claims that semiconductors are more important than ever.
In fact, the European Union (EU) took action last month to respond to a global semiconductor supply shortage. To reduce dependence on Asia and the United States, he enacted the EU Semiconductor Chip Act and announced that it would invest a total of 43 billion euros in the semiconductor sector. The goal is to achieve 20% of global production of semiconductors in Europe by 2030. However, the share of semiconductor production in EU member states is currently only 9%.
Saudi Arabia examines plans to trade crude oil exported to China in RMB
Saudi Arabia is considering setting the price of crude oil exported to China in RMB instead of USD. This is likely to overwhelmingly weaken the dollars position in the oil market. Trading of crude oil in RMB has been suspended and resumed for the past six years. However, the move appears to have accelerated as Saudi Arabia is dissatisfied with the US not actively intervening in Yemens civil war and the US lack of efforts to reach a nuclear deal with Iran.
China buys more than 25% of Saudi Arabias oil exports. Therefore, if oil is settled in RMB, the international status of RMB will inevitably increase significantly. It is also expected to bring about significant changes to the raw material market.
However, officials from the United States and Saudi Arabia believe that it is unlikely that crude oil will be traded in RMB instead of the dollar, as it may put the Saudi economy at risk if it is traded in RMB, which is relatively insecure.
OPEC Ukraine crisis likely to cut oil demand
The Organization of the Petroleum Exporting Countries (OPEC) predicted that if inflation does not subside due to the Ukraine crisis, it could result in a decrease in oil consumption. OPEC said its forecast for oil demand growth this year is still being evaluated at 4.2 million barrels per day, given the extremely high economic uncertainty. The forecast for this years crude oil supply from non-OPEC producers is also maintained at 3 million barrels per day. OPEC explained that this is also being evaluated.
In this regard, international oil prices have continued to plunge by nearly 10% for the second day. They are down more than 25% from their recent highs. When the instability in crude oil supply was greatest, WTI rose to $130 and Brent rose to $139. Analysts said a combination of factors, including concerns about stagflation, whether the Fed will raise interest rates, and possible negotiations between Russia and Ukraine, are driving oil prices down.
Also, the fact that the highs are now acting as downward pressure also plays a part. There is also an analysis that the key to the current decline in oil prices is whether it is a schedule adjustment or a major supply chain disruption. Currently, WTI is moving around the $95 level and Brent is moving around the $99 level.
