Yesterday markets wanted to believe an off-ramp was appearing. How do you assess risk appetite now?
Host
Peter Schaffrick
It's all about the duration of the conflict and its impact on energy markets. Sentiment shifted sharply from Monday to Tuesday from a 'Venezuela situation' to a 'much more drawn-out situation,' leading to risk reduction across asset classes.
The longer it goes on, the more impact on global economies and inflation. How do you think about oil/gas prices and inflation expectations?
Host
Peter Schaffrick
A sustained increase in energy prices has an impact on inflation. Our numbers are slightly smaller than Citi's, expecting ~20bps extra inflation for the Eurozone.
Bond markets seem to be pricing in more of an energy/inflation shock than equity markets.
Host
Peter Schaffrick
You have to see where we came from. Just before this, AI disruption suggested central banks might have to cut. ECB forwards were pricing 10bps of cuts; now they price 5-6bps of hikes. The starting point was different.
Is 2022/Ukraine the playbook? Treasuries haven't been the haven. Which haven works: dollar or gold?
Host
Peter Schaffrick
The situation is different from 2022. Europe was reliant on Russian pipeline gas (60%) and LNG. Now 60% of LNG comes from the US.