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 globalisation and further fuel higher structural inflation.
Wall Street capped another losing week on Friday, as investors weighted a faster pace of Federal Reserve tightening. The Dow was down 1.9% for its fourth straight weekly decline, while the S&P 500 and Nasdaq Composite dropped 2.8% and 3.8%, respectively, posting their third straight weekly decline. European markets also ended the week on a bearish note, with the pan-European Stoxx 600 down 1.7% on rising concerns about central bank tightening amid a slowing global economy.
Summary
- Major bourses in Asia plunged on Monday. The Shanghai Composite and the Hang Seng sank around 2.5% each, after Beijing reported new Covid-19 cases over the weekend and required people in Chaoyang district to undergo three virus tests this coming week. Sharp losses were also seen in Japan, South Korea, and Australia.
- European markets are poised to open sharply lower on Monday following the trend in US stock futures.
- Oil prices were down over 3% this morning, hitting their lowest in nearly 2 weeks, amid mounting concerns that prolonged Covid lockdowns in China and rapid rate hikes in the US would weigh on global economic growth and fuel demand. Monday’s slump extended a nearly 5% drop last week as demand concerns outweighed worries over tight global supply.
- French President Emmanuel Macron won a second term in office, defeating his far-right rival Marine Le Pen by a comfortable margin in a runoff election. With nearly all the votes counted, Macron was on course for a solid 58.6% of the vote, according to interior ministry figures.
- US Secretary of State Antony Blinken and Defense Secretary Lloyd Austin were in Kyiv and holding the highest-level talks between US officials and Volodymyr Zelenskiy in the country since Russia’s invasion. The visit comes with the war entering a new phase as Russia shifts its forces to the east and south after failing to take Kyiv or topple Zelenskiy’s government.
- Bloomberg reported on Friday that Renault may consider lowering its Nissan shareholding as part of plans to separate its electric vehicle business. The French carmaker has been pushing ahead with plans to split its electric and combustion-engine businesses in an attempt to catch rivals such as Tesla and Volkswagen.
- Twitter’s board met on Sunday to discuss Elon Musk’s takeover bid after the Wall Street Journal reported that the board may be more receptive to a deal following the disclosure by Musk that he has secured $46.5 billion in financing. The company could provide an update by the time it reports its latest financial results this Thursday.
- The week ahead will be the busiest week of the corporate earnings season, with megacaps and big techs reporting. In the US, investors will be watching the preliminary estimate for Q1 GDP growth and the PCE expenditure price index.
