Inflation took a turn for the worse in February as U.S. consumer price growth rose by 7.9%, representing the largest 12-month increase since January 1982. Core CPI, which excludes volatile food and energy - and is the Fed's preferred gauge of inflation - even advanced 6.4% Y/Y, according to the Labor Department's Bureau of Labor Statistics. All the numbers were gathered before the supercharged commodity rally driven by Russia's invasion of Ukraine, suggesting the red-hot inflation figures are nowhere close to peaking.

Aggressive tightening? Some had thought that central banks would slam the brakes after the conflict erupted, but the market reaction has been just the opposite. A hefty series of quarter point rate hikes are now on the table, with markets appearing to accept a coming period of "stagflation" (that's when sustained inflation is coupled with lower economic growth). It's a delicate balance for the Fed as tightening policy too sharply risks undercutting the economy and possibly triggering a recession.

"I don't want to make a prediction exactly as to what's going to happen in the second half of the year," said Treasury Secretary Janet Yellen, former chair of the Federal Reserve (current Chair Jay Powell is under a blackout period before the FOMC's meeting next week). "We're likely to see another year in which 12-month inflation numbers remain very uncomfortably high," she added, stating the Fed was looking at the data carefully and will take an actionable response.

Over in Europe: The ECB on Thursday cut its growth forecasts and raised inflation predictions, against the backdrop of the war in Ukraine. President Christine Lagarde even called the conflict a "watershed" moment for the continent, but would do whatever it takes to pursue price stability. She also said the ECB will scale back its bond-buying program "shortly" before raising rates, and with net purchases likely stopping in Q3, the market is pricing in a rare ECB quarter-point hike for October. (11 comments)

Going downhill

President Biden will tack on to the "mother of all sanctions" today, calling for an end to normal trade relations with Moscow. The decision, which will be taken along with the European Union and G7 countries, will revoke Russia's "most favored nation" status, clearing the way for increased tariffs on imports. Russia sells about a third of its exports to the EU, compared to around 5% to the U.S., according to data from the International Monetary Fund.

Fighting back: Moscow announced an export ban on more than 200 products, ranging from fertilizer and agricultural machinery to telecoms and turbines. However, it stopped short of limiting sales of energy and raw materials, the nation's largest contribution to global trade. Vladimir Putin additionally said he would find "legal solutions" to seize assets based in the country from international groups that have decided to close their operations, like "introducing external management and then transferring these enterprises to those who actually want to work."

"Our economy is experiencing a shock impact now and there are negative consequences, they will be minimized," Kremlin spokesman Dmitry Peskov told reporters. "This is absolutely unprecedented. The economic war that has started against our country has never taken place before. So it is very hard to forecast anything."

Elsewhere: The U.S. Senate last night voted 68 to 31 to approve $13.6B for humanitarian and military aid for Ukraine (it passed alongside a $1.5T government funding bill). "Currently around 50% of our businesses are not operating, and those which are still operating are not operating at 100%," said Oleg Ustenko, chief economic adviser to Ukrainian President Volodymyr Zelenskyy. "The situation in terms of economic growth, is going to be really very depressing, even if the war immediately stops," he added, noting that $100B worth of infrastructure assets have been destroyed since the invasion. (19 comments)

Delisting fears

Chinese stocks listed in the U.S. had a bad day on Thursday, as the SEC named five companies from China that could be delisted for failing to abide by American accounting regulations. YumChina Holdings (YUMC), BeiGene (BGNE), Zai Lab (ZLAB), ACM Research (ACMR) and Hutchmed (HCM) have been cited for not adhering to the Holding Foreign Companies Accountability Act, which became law in December 2020. That statute gives the SEC the power to delist firms if they fail to allow U.S. regulators to review their audits for three years in a row.

Bigger picture: It's not the first time the SEC has warned companies that their shares are at risk of being delisted, but the reaction was swift across Wall Street. The selloff spread to the ADRs of Chinese internet players like JD.com (JD), Alibaba (BABA) and Baidu (BIDU), leading the sector to suffer their worst selloff since 2008. The Invesco Golden Dragon China Portfolio ETF (PGJ), which is based on the Nasdaq Golden Dragon China, even plunged 10% to its worse level since 2013.

"Investors recently have been nervous from many regulatory uncertainties in China, geopolitical risks involving China/U.S. and multiple SEC-related inquiries involving Chinese stocks, all of which have increased uncertainty on China stocks,” said Jefferies analyst Michael Yee.

Outlook: China has blocked domestic companies and their local auditors from complying with audit requests of foreign regulators, though it hopes a solution can be achieved. "We believe the two sides can reach an agreement that aligns with the law and regulation of both countries that protects global investors," China Securities Regulatory Commission declared, saying it "opposed the politicization of securities regulation by some forces." U.S.-listed shares worth over $2T hang in the balance. (165 comments)

Second pandemic anniversary

Mask mandates on airplanes, buses, trains and car share services have remained in place even after the CDC loosened guidance last month to drop indoor face coverings. Having been extended twice before, the federal mask requirement (first implemented in 2020 to prevent the spread of COVID-19) has now been extended for a third time until April 18, though it may be coming to an end soon. During the period of the latest extension, the CDC will work with government agencies on a revised policy framework for when mask requirements can be lifted.

Quote: "We have to look not only at the science with regard to transmission in masks but also the epidemiology and the frequency that we may encounter a variant of concern or a variant of interest in our travel corridors," said CDC Director Dr. Rochelle Walensky. Remember another speech from President Biden last July, which declared that the U.S. had achieved "independence" from the coronavirus, before a fourth and fifth wave of COVID swept across the nation.

Some corporations are also making moves. Citing a steep decline in cases, United Airlines (NASDAQ:UAL) will allow unvaccinated workers to return to their jobs starting March 28 (roughly 2,200 workers are still on unpaid leave, while another 200 were fired). It's a big shift from a company that had one of the strictest inoculation mandates in the country, though "of course, if another variant emerges or the COVID trends suddenly reverse course, we will reevaluate the appropriate safety protocols at that time," explained Kirk Limacher, United's VP of Human Resources.

Two long years: On March 11, 2020, the World Health Organization said that COVID-19 "could be characterized as a pandemic," which went on to upend the lives of everyone on the globe. The impacts on many individuals' and society's physical and mental health is yet to be fully be realized, while the full effects of the virus are still being investigated by scientists. (2 comments)

Today's Markets

In Asia, Japan -2.1%. Hong Kong -1.6%. China +0.4%. India +0.2%.
In Europe, at midday, London +1.6%. Paris +1.3%. Frankfurt +2.1%.
Futures at 6:20, Dow +0.4%. S&P +0.5%. Nasdaq +0.4%. Crude +3.6% to $109.84. Gold -0.3% to $1994.40. Bitcoin -0.2% to $39,066.
Ten-year Treasury Yield unchanged at 2.00%

Today's Economic Calendar

10:00 Quarterly Services Report
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Biggest bond deal in years: AT&T-Discovery (T, DISCA) raise $30B.

Rivian (RIVN) slides to new low after halving production outlook.

Oracle (ORCL) plunges as fiscal Q3 results miss expectations.

After Amazon (AMZN), these companies could follow a stock split wave.

Boycott: Disney (DIS) pauses all business in Russia.

Moderna (MRNA) begins dosing in Phase 2 of Omicron-specific trial.

New plans? Peloton (PTON) considers major pivot under new CEO.

Ford (F), PG&E (PCG) test new F-150 EV as power source for homes.

DocuSign (DOCU) slips after issuing weak revenue guidance.

Post-earnings: J.P. Morgan downgrades Asana (ASAN) on slowing growth.