Brian Jacobsen provides perspective on the Russia-Ukraine war and other key topics of the current week—plus, his thoughts about what the week ahead may hold. Here’s his report for the week of May 28–June 3, 2022. Plus: There’s a recap of May’s key events.

The week that was

  • The nonfarm payroll report for May was still too hot for the Federal Reserve (Fed) to handle. There was a slowdown in payroll gains, but at 390,000, it’s still an incredibly strong report. Some employers may be pausing their hiring spree as the payroll gains weren’t as broad-based as they were the previous months. The unemployment rate was unchanged at 3.6%. Wage growth slowed from a 5.5% year-over-year increase in April to 5.2% in May.

Russia-Ukraine update:

  • Actions:
    • The U.S. will provide Ukraine with advanced rocket systems.
  • Sanctions:
    • The European Union (EU) agreed to ban imports of Russian oil and oil products that are transported by sea. Hungary, which is landlocked, demanded that it still be able to import oil by pipeline. The embargo will affect two-thirds of EU oil imports from Russia.
    • Russia cut off natural gas deliveries to some buyers in Germany, Denmark, and the Netherlands who refused to pay for gas in rubles. The total amount of natural gas that Russia has stopped sending to Europe amounts to approximately 15% of the total amount sent to all buyers in Europe.
  • Negotiations:
    • Turkey’s President Erdogan is blocking Finland’s and Sweden’s applications to join NATO. Erdogan claims Finland and Sweden support the Syrian Kurdish People’s Protection Units (YPG) and that the YPG has deep ties to the Kurdistan Workers’ Party (PKK), a group Turkey has been fighting since 1984 and labels a terrorist group. This is extra complicated as the YPG is part of U.S.-led forces in the fight against Islamic State. The U.S.’s connection to YPG has been an ongoing point of contention between the U.S. and Turkey.


  • China eased some of its COVID-19 restrictions. Shanghai formally ended its two-month lockdown.
  • Bank of Japan Deputy Governor Masazumi Wakatabe said the central bank should not rule out additional easing measures since he thinks the inflationary impulse is temporary.
  • The Bank of Canada hiked its key policy rate by 50 basis points (bps; 100 bps equal 1.00%), to 1.5%.
  • The Institute for Supply Management Manufacturing Index for May improved to 561. New-order and production activity increased, prices paid and suppliers’ deliveries came down a bit, and employment contracted. In short, supply issues and inflation might be getting better, but employment may be cooling.
  • Job openings in the U.S. dropped to 11.4 million as of the end of April. That drop is encouraging as the Fed thinks the labor market is red hot, and with openings coming down at a gradual pace, maybe we’ll see a nice, gradual glide path to a slower and more sustainable growth rate for the economy.
  • The Fed’s Beige Book said most Federal Reserve Districts experienced slight or modest growth from the middle of April to the end of May. Higher prices are weighing on consumer spending and residential real estate activity.


  • President Biden met with Fed Chair Powell. Afterwards, President Biden said that fighting inflation remains primarily within the Fed’s purview.
  • The U.S. entered into a new pact with Taiwan to promote trade. Taiwan is a leading supplier of advanced semiconductors.
  • The Biden administration will forgive $5.8 billion in student loans tied to Corinthian Colleges, a for-profit college system that filed for bankruptcy in 2015.
  • There were reports that Saudi Arabia might increase its oil output to help offset any decline in output out of Russia. There were even reports that OPEC+ (OPEC plus Russia) might give Russia the “minus” and boot them out. While some of that may happen, OPEC+ did decide to increase its oil output by 648,000 barrels per day in July and August, which was 50% more than previous output increases.

 The week to come

  • U.S. inflation numbers for May come out on Friday. China releases its inflation, exports, and imports numbers for May on Thursday.
  • Australia’s central bank has a policy meeting on Monday. The European Central Bank (ECB) has its policy meeting on Thursday.

The month that was

  • Markets were hit hard in the early part of May with a trifecta of fears: central banks tightening, China’s shutdowns, and conflict in Ukraine. The combination of slowing growth, high inflation, and geopolitical risks had the S&P 500 Index down around 20% from its January 3 high. Equities rallied in the last of week of May as China began easing restrictions, the Fed shifted from being super-hawkish to something more like a chicken hawk (focused on inflation, but afraid of doing too much), and U.S. consumers continued to do what they do best: consume.
  • Central banks:
    • The Fed hiked rates by 50 bps at its May 4 meeting and announced it will start shrinking its balance sheet in June. The Fed is focused mostly on inflation, but it’s cognizant of the risks to both growth and inflation from Russia’s invasion of Ukraine and China’s continued COVID-19 shutdowns. Investors were reassured that the Fed might hike two more times by 50 bps and then see how things are shaking out before continuing full-speed-ahead with rate hikes.
    • ECB President Lagarde said the eurozone economy will likely be in a position where the ECB can move its policy rate into positive territory by the third quarter.
    • The Peoples Bank of China cut interest rates as part of a broader effort to support growth.
  • Economic activity:
    • China’s economic activity took a nosedive in April. Industrial activity fell. Retail sales slumped. Premier Li Keqiang ordered officials to take action against a “complicated and grim” employment situation. The employment situation has been caused by China’s zero-COVID-19 approach to dealing with the virus via rolling lockdowns of broad swaths of the country.
    • U.S. inflation in April was hotter than expected. Or, maybe it was cooler. It depends on which inflation gauge you look at. The Consumer Price Index saw core inflation, which excludes volatile food and energy prices, increase more than expected. However, the Personal Consumption Expenditures Price Index—the index the Fed targets and that adjusts the components in light of how people are actually spending their money—came in somewhat cooler than expected. Both are still high, but both are also coming off their highs set back in March.
    • With incredibly high food prices, countries are resorting to protectionist measures to hoard commodities for domestic consumption instead of exports. India banned the export of wheat. Indonesia has banned the export of some types of palm oil. These types of protectionist policies tend to push up prices globally and make food shortages worse rather than better.

Thanks for reading, stay informed!

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