How can you dampen inflation while not limiting growth? This is the difficult task central banks have to face. As others struggle with rising prices, we’ll see just how much China’s COVID lockdowns impede trade and slow down its economy.

And another complication — M&A deals worth over $400 billion are waiting for financing, but costs are rising fast.

This is the week ahead for markets: Lewis Krauskopf, Tom Westbrook, Andres Gonzalez in Madrid, Karin Strohecker, and Tom Westbrook, New York.

1. NAME OF THE GAMES

Inflation is igniting central bankers’ sense of urgency. Australia raised more than was expected, and the Fed announced its largest rate hike in 22 years. India made an unanticipated move.

The policy-tightening frenzy is only adding to the clouds of uncertainty over the global economy. It has been hit hard by rising food and energy costs, the war in Ukraine, and China’s COVID curbs. The Bank of England, while increasing rates, flagged the possibility of recession.

Germany’s ZEW sentiment Index and preliminary Q1 UK data on GDP will show the delicate balance central banks are keeping. In emerging markets, Mexico and Peru will confirm that rate increases are continuing.

2/INFLATION STATIONS

Are the U.S.’s inflation levels at their highest point in more than 40 years after their fastest increase? This Wednesday’s release of the April consumer price indicator will reveal.

CPI was 8.5% in March on an anualized basis. Record high gasoline prices led to the increase. CPI increased 1.2% monthly, which is the highest increase since September 2005.

The early forecasts for the month are calling for an increase of 0.2%.

Inflation surge in March likely sealed Fed’s decision to raise its rate 50 basis points on May 4. Inflation print in the future could influence expectations about how monetary policies will change moving forward.

3/SPRING BREAKDOWN

China’s anti COVID locksdowns show that it is preparing for spring. In addition to the immense strain it places on the lives of tens and millions of people worldwide, the damage to the global economic outlook is enormous.

Markets are losing patience with the lack of policy support. The data on Monday showed that China’s export growth reached a 2-year low in April. It is clear that China, the world’s second largest economy, is suffering from lockdowns.

Prices, iron ore and oil are all already in decline. The slowdown comes amid a strong U.S. hike cycle and is threatening to derail foreign investors who are putting their money into local markets.

4. OIL AND PRIDE

For the European Union, banning Russian oil imports appears to be a matter not of if but of when. According to the bloc’s highest diplomat, it is near to agreeing to its sixth and most severe set of sanctions on Moscow in response to Ukraine’s invasion.

A phased embargo against Russian oil which accounts for more than 25% of EU oil imports is the centerpiece of this package. It will make it more difficult for European oil companies to source new sources of crude, as well as leave drivers facing higher gas prices at a time where the global cost-of-living crisis is increasing.

Russia will also hold its annual May 9 Victory Day celebration in Moscow, to celebrate the anniversary of Soviet Union’s victory over Nazi Germany. Rumours that Vladimir Putin would declare war on Ukraine or call for national mobilisation were dismissed by the Kremlin.

5/WAITING TO MAKE MONEY

The global market is beginning to rebound after the first quarter slump that was caused by Russia’s invasion of Ukraine.

April M&A rose 30% from March to $387 billion, and included mega deals such as Elon Musk’s $44 billion buyout of Twitter (NYSE:) and a 58 billion-euro ($61.04 billion) bid by a consortium for Italian airport and motorway operator Atlantia.

Now the M&A market faces another challenge – funding.

More than $400 billion in deals were announced globally since January. However, they have not been completed yet, according to data from Refinitiv.

M&A deals typically include ‘staple financing’, a pre-arranged package offered to potential purchasers to finance the acquisition. After the agreement is reached, the buyer may invite other banks to participate in the syndicated financing. It can also tap the bond and equity markets.

Since the agreements were reached, however, financing costs have increased dramatically. Global corporate yields have soared by 100 basis points over the February 24th invasion and by 150 bps in U.S. junk companies since then, ICE(NYSE:) BofAindices reveal.

Some deals have been left hanging. These include Microsoft’s acquisition of Activision Blizzard by Microsoft (NASDAQ); Musk’s Twitter purchase and Macquarie’s investment in British Columbia Investment Management. National Grid (LON:).

($1 = 0.9502 euros)

Rate hikes cycle is underway https://tmsnrt.rs/3P3A7xc

US consumer price inflation https://tmsnrt.rs/3KKpcVJ

Lockdowns hit the brakes on China’s growth https://tmsnrt.rs/3ylMpLr

World’s top oil producers https://tmsnrt.rs/3KNAw3q

Top 10 pending M&A deals globally ($ bln) https://tmsnrt.rs/3vOSApi

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>