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.
Equities in Europe closed the first trading day of 2023 higher, with the benchmark Euro Stoxx 50 adding 1.6%, driven chiefly by real estate shares, as investors took advantage of lower valuations following a dismal 2022. In a session marked by thin trading volumes, with most markets closed for the New Year holidays, investors digested a slew of economic data while reassessing the outlook for monetary policy.
Summary as at 03.01.2023
- Asian share markets were mixed on Tuesday as most of the region kicked off the first trading session of the year. Investors remain concerned that the rapid spread of coronavirus infections in China could further hurt economic growth and hinder global supply chains, even if opening up would be positive in the long run. Shares in Australia and South Korea declined, while Hong Kong and mainland China shares gained. Markets in New Zealand and Japan remained shut for the holidays.
- European shares are set to take a breather following Monday’s surge while on Wall Street, US equity futures are called slightly higher.
- Oil prices traded lower this morning as traders returned to their desks, with fears of a global economic slowdown and lower energy demand dominating sentiment at the start of the year.
- The Caixin China General Manufacturing PMI fell to 49.0 in December from 49.4 in November, pointing to the lowest print since September, amid a spike in Covid cases that disrupted production. The latest results also marked the fifth straight month of drop in factory activity, compared with the market consensus of 48.8, with output, new orders, and export sales all declining further.
- Final PMI data showed that the Eurozone’s and the German manufacturing downturn eased in December, offering a somewhat upbeat outlook for the region. Meanwhile, German finance minister Christian Lindner told Bild newspaper he expected inflation in Germany to drop to 7% this year and to continue falling in 2024 and beyond.
- A warmer-than-expected start to winter across large parts of the world is rapidly easing fears of a natural gas crisis that had been predicted to trigger outages and add to pressure on power bills. Forecasts point to temperatures above seasonal norms for most of Europe in the next two weeks, while the US expects better weather through mid-January.
- Tesla delivered fewer vehicles than analysts expected last quarter, missing estimates despite taking the unusual step of offering hefty incentives in its two biggest markets. The company handed over 405,278 vehicles to customers in the last three months, short of the 420,760 average estimates. While the total was a quarterly record for Tesla, the company opened two new assembly plants last year and still came up short of its goal to expand deliveries by 50%.
- Production at Foxconn’s in China which is Apple’s largest manufacturing facility for iPhones in the world, is almost back to full production, with its December shipments reaching about 90% of initial plans. Foxconn has been offering bonuses to attract new workers and convince those still there to stay on.
- Germany’s Rheinmetall announced yesterday it won an order worth more than a quarter billion euros for the supply of electric vehicle parts to a premium German automaker.
