The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation.
The Dow Jones closed 386 points higher last Friday, while the S&P 500 and Nasdaq 100 gained 1.6% and 1.9%, respectively, as Treasury yields eased from their recent highs and investors were less concerned about the monetary policy path after Federal Reserve officials’ speeches. The market movement came in tandem with easing Treasury yields, which brought some respite to beaten-down technology and other high-growth shares. Meanwhile, data showed that the US services sector was still growing, even though the Federal Reserve has been trying to cool the economy. For the week, the Dow added 0.9% and the Nasdaq gained 1.3%, while the S&P 500 snapped a three-week decline by rising 0.9%. Meantime, European equities also rose on Friday, with the Euro Stoxx 50 index up 1.3% led by auto and mining shares while oil and gas-related equities declined. For the week, the benchmark Euro Area index climbed 1.5%.
Summary as at 06.03.2023
- Asian equity markets were mixed on Monday as Beijing disappointed markets by setting a modest growth target for this year. Investors also digested a report showing South Korean inflation slowed more than expected in February while awaiting more data from major Asian economies this week. Shares in Hong Kong and mainland China fell, while Australian, Japanese and South Korean equities rose.
- European shares are headed for gains while US equity futures were also marginally higher as traders assessed positive signs from the US against the weakened prospect of significant Chinese stimulus.
- Oil prices gave back some gains from last week as a weaker-than-expected GDP forecast from China dented some optimism over a recovery in crude demand this year. Meanwhile, the Wall Street Journal reported a growing rift between two of OPEC’s biggest producers, Saudi Arabia and the United Arab Emirates, sparking fears of a crack in the cartel’s policy which could lead to more supplies.
- China set a modest economic growth target of around 5% for the year, with the nation’s top leaders avoiding any large stimulus to spur a consumer-driven recovery already underway, suggesting less of a growth boost to an ailing world economy.
- The ISM Services PMI for the US was at 55.1 in February, little changed from 55.2 in January and above expectations of 54.5. The key services sector index continued to grow as new orders expanded at an accelerated pace, along with employment, and prices paid decelerated, while business activity fell but continued to grow.
- Arm, the British chip designer owned by Japan’s SoftBank, is likely to aim to raise at least $8 billion from what is expected to be a blockbuster US equity market launch this year. Arm is expected to confidentially submit paperwork for its IPO in late April.
- Harris Associates sold its entire stake in Credit Suisse ending ties with the firm after about two decades of ownership and piling further pressure on the troubled Swiss lender’s leadership. The investment was exited over the past three to four months. Harris Associates was the biggest shareholder in Credit Suisse for many years, and halved its 10% holding toward the end of 2022 to 5%.
- Italy’s state lender and Macquarie Group made an offer for Telcom Italia’s landline network, setting up a multi-billion-euro takeover battle with KKR. In a statement late Sunday, Cassa Depositi e Prestiti said its board approved the bid for Telecom Italia’s grid and its submarine cable business, Sparkle. No terms were given. The bid matches KKR’s €20 billion valuation for the network, but offers more in cash, people familiar with the matter said.
- On Friday Volkswagen reported better-than-expected results in 2022 and a higher dividend. It also expects further sales growth in 2023. Separately, the carmaker is also reportedly in talks to determine the location of its first gigafactory in North America.
