Pre-market equities: Ukraine’s victories are thrilling on Wall Street. The thrust may soon wear off

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Last week, Ukrainian troops dealt a severe blow to Russia’s take over parts of their country’s east with a rapidly evolving offensive. The extraordinary campaign has ushered in a new phase of the war and could force Vladimir Putin to reconsider his strategy and his goals.

What’s happening: Ukrainian forces have recaptured more than 1,160 square miles of territory in the past few days.

The developments are helping to lift equity markets. War has been a major obstacle for Wall Street since Putin’s invasion of Ukraine in February has skyrocketed the price of energy and other commodities. This made it more difficult to estimate when inflation would start to decline and, consequently, to determine what central banks like the Federal Reserve would do.

But investors remain cautious as they look to the future, warning that there are still too many unknowns to launch into a full-scale celebration.

“It is very difficult to know exactly what will happen in the war and what the next steps will be on the Russian side, so I think we cannot really invest based on that,” Willem Sels, chief global investment officer at HSBC Private Banking and Wealth Management, mi he said.

On the radar: the situation is very fluid. Russia launched airstrikes on the Kharkiv region on Monday, targeting the city center and residential neighborhoods.

And regardless of what comes next, it may be too late to save the European economy from recession as the sharp rise in energy prices forces households to spend less on non-essential goods and forces heavy industry to close factories. .

Economic output in the UK remained stagnant in the three months to July, according to data released on Monday. Meanwhile, the German Ifo institute has slashed its growth estimates in Europe’s largest economy.

“We are heading into a winter recession,” the institute’s chief forecaster said Monday.

Government packages aimed at supporting consumers could help support spending. The UK and Germany, along with other EU countries, have announced € 500 billion ($ 507 billion) in subsidies for utility bills and other measures to mitigate the impact.

But central banks will likely have to continue aggressively raising interest rates to keep inflation in check. This will keep economic growth in check.

“Monetary policy is likely to have to tighten further to effectively tackle generalized inflation in the UK and Europe,” Neil Shearing, the group’s chief economist at Capital Economics, said Monday in a note to clients.

The US is more isolated from the war in Ukraine, but is still under surveillance of the recession as the Federal Reserve signals it will remain tough. China, meanwhile, is battling a housing crisis and the impact of harsh coronavirus restrictions that continue to weigh on growth.

“Skyrocketing gas prices and aggressive monetary tightening have pushed the global economy to the brink” of a contraction later this year and early next year, said Ben May, research director. global macro at Oxford Economics, in a recent research note. “We expect a global recession to be averted, but a sustained and substantial improvement in growth also seems unlikely.”

This makes it difficult for investors to get too excited, even if they hope there will be opportunities to use the ongoing turbulence to their advantage.

“We are also playing on volatility,” Sels said. “You will have many ups and downs.”

Around the world, transport workers who are affected by rising cost of living and long strike hours add to the uncertainty about when global supply chains will begin to function more normally.

See here: Unions representing tens of thousands of essential workers at US freight railways could go on strike this week. This could stop nearly 30% of the nation’s freight transportation, according to data from the Bureau of Transportation Statistics.

This would have major ramifications for businesses across the country and for the economy in general. A complex network of logistics companies helps move goods from point A to point B, but trains remain a crucial cog in the system.

A prolonged stall could mean empty shelves in stores, temporary closures of factories that don’t have the parts they need to function, and higher prices due to limited availability of various consumer goods, reports my CNN co-worker Chris Isidore. .

The Association of American Railroads estimates that an interruption of the national rail service could cost the economy more than $ 2 billion per day. Shipments typically increase in the fall as companies stock up before the holiday season.

“We hear more and more that shippers and railroads are getting anxious,” said John Drake, vice president of transportation, infrastructure and supply chain policy for the US Chamber of Commerce, a business lobby.

A central dispute is over the rules governing the hours of workers. Many of the engineers and conductors who make up the two-person crews on each train must be “on call” to report to work seven days a week, preventing them from making their own plans and fueling staff turnover.

Look at this space: Since railroad workers are subject to a different labor law than the one that controls labor relations in most businesses, it is possible that Congress can take action to prevent or quickly stop a strike. But that would require a rare degree of bipartisanism in Washington just weeks before the midterm elections.

Preparations to “manage and protect shipments of hazardous and safety-sensitive materials” will begin on Monday, the Association of American Railroads said, and warned that some customers “may also begin to experience service delays or suspensions.” Unions say this is a “completely unnecessary” railroad maneuver aimed at increasing pressure on Congress.

Do you want proof that cryptocurrency prices remain closely linked to what’s happening in the stock market? Check out bitcoin, which has risen in recent days as the S&P 500 gained ground.

The latest: Bitcoin is back above $ 22,000 for the first time in about a month. Cryptocurrency companies are also seeing their shares rise. Coinbase shares were up 2% in pre-market trading on Monday after jumping nearly 11% on Friday.

But this year’s losses remain mouth-watering. The price of bitcoin plummeted 54% in 2022. Coinbase shares, which got one of the hottest initial public offerings of 2021, are down 68%. The declines have been closely correlated with the sell-off of stocks and a move away from riskier assets, despite hopes among cryptocurrency enthusiasts that digital currencies will act as an effective hedge or store of value like gold.

As always, the future prospects are murky and could depend on where the broader market goes from here. Investors are looking forward to the release of US inflation on Tuesday, which could set the tone for the rest of the month.

“Bitcoin’s recovery since the end of last week has been very strong,” said Craig Erlam, senior market analyst at Oanda. “Things could improve in the short term, although again, this could be due to inflation data.”

Oracle (ORCL) reports results after US markets close.

Coming Tomorrow: Has US Inflation Peaked? Economists interviewed by Refinitiv expect to learn that consumer prices rose 8.1% in the year through August, down from 8.5% the previous month.

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