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 added over 200 points on Tuesday and the S&P 500 rose 0.2% while the Nasdaq was down 0.2%, following a sudden pullback in tech shares, as investors assessed a slew of upbeat earnings from big retailers against a backdrop of growing concerns over slowing economic growth. Elsewhere, European equities extended gains for the fifth session in a row yesterday, with the Euro Stoxx 50 adding 0.4%, underpinned by miners and defensive sectors.
Summary
- Shares in Asia mostly rose on Wednesday, with the Nikkei jumping 1% to hit its highest since January, amid a broad-based rally. Stocks in Hong Kong reversed their two-day slide while those in China rose modestly as Beijing steps up policy support after weak Chinese data for July. The Kospi fell, however, on some profit-taking.
- European equities futures edged up this morning while their US counterparts were broadly flat as traders await Fed minutes later today that may shed light on the outlook for interest rates.
- Crude prices edged up this morning after an industry report showed a larger-than-expected decline in US crude inventories, falling by 448,000 barrels last week compared with market forecasts of a 117,000-barrel drop. Meanwhile, oil prices lost more than 8% in the previous three sessions and sank to their lowest in six months as a potential boost in Iranian supply coincided with mounting risks of a global recession.
- The annual inflation rate in the UK increased to 10.2% in July from 9.4% in the previous period and slightly above market forecasts of 9.8%, data showed this morning.
- Housing starts in the US tumbled 9.6% month-over-month to an annualised rate of 1.446 million units in July, the lowest since February of 2021 and well below market expectations of 1.54 million. The housing sector has been cooling down amid soaring prices of materials and rising mortgage rates.
- Home Depot’s second quarter results topped Wall Street’s views as home improvement demand remained robust despite an inflationary environment, while the retailer reiterated its full-year expectations.
- Walmart said it no longer expects a hefty profit decline during fiscal year 2023 as it reported results that topped estimates, driven by higher prices and supply chain cost reductions.
