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.
US equities finished Thursday’s session mixed, as caution appeared to have set in ahead of today’s key July labour report. The Dow Jones lost 0.3%, the SP 500 shed 0.1%, while the Nasdaq Composite was up 0.4%. Europe was mostly higher, with the benchmark Euro Stoxx 50 adding 0.6% as gains across travel and leisure shares more than offset losses in oil and gas companies.
Summary
- Asian markets were higher today with shares in shares in Taiwan leading gains in the region as investors shake off China’s military drills following US House Speaker Nancy Pelosi’s visit.
- European shares are on track for gains as US equity futures push higher as well.
- Oil prices were around 1% higher this morning, after hitting their lowest since before Russia’s February invasion of Ukraine in the previous session, as the market fretted over the impact of inflation on global economic growth and demand.
- The Bank of England raised its main rate by 50bps to 1.75% yesterday, the sixth consecutive rate hike, and pushing borrowing costs to the highest level since 2009. It is the biggest rate increase since 1995 to tame inflation expected to peak at 13.3% in October. According to BoE projections, the UK is set to enter recession in the fourth quarter.
- China likely fired missiles over Taiwan for the first time during its biggest military drills around the island in decades. Four ballistic missiles fired by the People’s Liberation Army during Thursday were believed to have flown over Taiwan’s main island, the Japanese Defence Ministry said. Those four were among five Chinese missiles that landed in Japan’s exclusive economic zone.
- Allianz on Friday posted a worse-than-expected 23% fall in second quarter net profit, dampened by volatile markets, but confirmed its target for the full year.
- Deutsche Post this morning reported double-digit growth in revenue and earnings and confirmed its outlook for 2022, as its flourishing freight and express business built on an already-strong start to the year.
- Alibaba reported earnings that surprised investors on the upside yesterday even though it posted a slim drop in revenue for the first time since its 2014 listing.
- Kellogg reported better than expected second quarter revenue and earnings figures, despite facing an unusually challenging supply and cost environment. It raised its full-year guidance for organic sales growth and EPS expansion, while forecasting its cash flow to be at the high end of its outlook.
