Key Takeaways
- Russian forces claim significant advances in eastern Ukraine, with the General Staff Chief stating control of 80% of Vovchansk and the capture of Kupyansk, while President Putin asserts 15 Ukrainian battalions are blocked in the Kupyansk area.
- Ukrainian President Zelenskyy is engaging in peace process discussions with US Secretary of the Army Daniel Driscoll, with teams set to work on peace plan points, even as oil prices reacted to the possibility of sanctions rollback.
- Chicago Fed President Austan Goolsbee expressed unease regarding current inflation trends, noting that inflation "seems to have stalled" and that the 2% target is paramount, with 3% being "too high."
- Goolsbee also highlighted challenges in assessing the business cycle due to a boom in data centers and a "big mess" in official economic data, making him wary of front-loading rate cuts.
- The US Treasury successfully sold $19 billion in 10-year TIPS reopening, with a high yield rate of 1.843%, alongside a $6.520 billion Fed reverse repo operation.
Russian forces have reported substantial gains in eastern Ukraine, with General Staff Chief Gerasimov claiming control over 80% of Vovchansk and the complete capture of Kupyansk. President Vladimir Putin further stated that fifteen battalions of Ukraine’s armed forces are blocked in the Kupyansk area and that Russian forces are actively fighting in Kostiantynivka, urging Ukrainian soldiers to surrender. These declarations come after Putin reportedly inspected the "West" grouping of Russian forces and met with the Chief of the General Staff.
Amidst these developments, Ukrainian President Volodymyr Zelenskyy has engaged in discussions with US Secretary of the Army Daniel Driscoll in Kyiv, focusing on the peace process. Both Ukrainian and US teams are slated to collaborate on specific points of a peace plan. The prospect of a US-Russia draft peace plan, which could potentially lead to the rollback of sanctions and a return of Russian oil supply, caused oil prices to slip, though the viability of such a deal remains uncertain due to Moscow's unacceptable demands to Kyiv. A US official indicated that sanctions on Russian oil firms are having their intended effect.
On the economic front, Federal Reserve Bank of Chicago President Austan Goolsbee voiced considerable concern over the current inflation landscape. He reiterated that the Fed's 2% inflation target stands firm, deeming 3% inflation as "too high" and expressing unease that inflation appears to have stalled or even moved upward. Goolsbee is particularly wary of front-loading rate cuts, especially given the perceived lack of clear data.
Goolsbee pointed to a "big mess" in official data, attributing it to a "blackout" that has made him "more paranoid about the inflation side" due to less available information compared to the labor market. He also noted that the boom in data centers is complicating the assessment of the business cycle and raised concerns about a possible AI investment bubble. While acknowledging a "notable slowdown in the number of jobs created," Goolsbee expressed skepticism that this slowdown signals a recession, characterizing the current environment as "low hiring, low firing," indicative of uncertainty. He also suggested that a 50-year mortgage rate could diminish the impact of monetary policy decisions.
In other market news, the US Treasury successfully reopened a $19 billion sale of 10-year Treasury Inflation-Protected Securities (TIPS), achieving a high yield rate of 1.843%, up from the previous 1.734%. The bid-to-cover ratio improved to 2.41x from 2.20x, with direct accepted bids at 23.7% and indirect accepted bids at 61.5%. Additionally, seven counterparties participated in a Fed reverse repo operation, taking $6.520 billion, a significant increase from the previous $1.129 billion across eight bids.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.