Morgan Stanley forecasts this year's global economic growth to be less than half of 2021 due to risks from the Russia-Ukraine conflict and COVID-19 surge in China even as central banks tighten monetary policy to control record high inflation.

The brokerage expects global growth to be at 2.9%, about 40 basis points below consensus, compared with the 6.2% growth in 2021, on a year-on-year basis.

"The deceleration is global, driven by the combination of waning fiscal impetus, tightening monetary policy, a continuing drag from Covid, persistent supply chain frictions, and, most recently, repercussions from the Russian invasion of Ukraine," wrote Morgan Stanley economists in a note dated Tuesday.

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US inflation is expected to moderate in April, pulling back from 40-year highs set in March.

Economists’ forecast headline CPI to fall to a monthly rate of 0.2% versus 1.2% in March, with the yearly figure expected to recede to 8.1% from 8.5% last month. Modest declines in fuels prices are expected to be the key contributor in the moderation of inflation in April.

In March, increases in prices for gasoline, shelter, and food were the largest contributors to the headline rate. The gasoline index rose 18.3% in March, accounting for over half of the all items increase; other energy component indexes were also higher, with the food index up 1% and the food-at-home index up 1.5%.

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Near-term economic activity in the UK has almost certainly reached its zenith if the Bank of England’s latest staff projections are any kind of benchmark.

UK GDP is estimated to have expanded 1.0% in the first quarter of the year, just above the BoE’s May Monetary Policy Report (MPR). On the month, analysts expect a flat read, down from 0.1% last month.

Nomura’s George Buckley said, “March is the first full month after Russia invaded Ukraine, so there will be much focus on how these GDP figures reflect this. While the output index of the PMI manufacturing survey fell sharply in March that of services remained solid, suggesting that any decline in GDP in March could well be limited by the ongoing recovery of services from Covid.”

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US companies are ramping up efforts to protect their profits from a relentless rally in the dollar, as the greenback surges to multi-decade highs.

The dollar has climbed about 15% against a basket of currencies over the last year, helped by a hawkish Federal Reserve and heightened geopolitical tensions that have boosted the greenback's safe-haven appeal.

That surge has reduced the profits of US multinational companies that convert foreign currency into dollars, adding to corporate worries over soaring inflation and a murky economic outlook and pushing some to more actively seek ways to hedge their earnings.

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