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 major US equity indices ended mixed on Friday, with the Dow losing 0.15% and the S&P shedding 0.08%, while the Nasdaq Composite gained 0.12%. Those moves came as a stronger-than-expected jobs report allayed fears of an economic slowdown, but reinforced the Federal Reserve’s case for continued aggressive tightening in the coming months to fight inflation. For the week, all three major indices were headed higher, with Nasdaq up 5%, followed by a 2% climb in the S&P 500, and a 0.8% rise in the Dow. Meanwhile, European equity markets closed mostly higher on Friday, capping an overall positive week for the region.
- Shares in Asia mostly fell on Monday, with the Hang Seng and the Shanghai Composite sinking over 2.5% and near 1.5% each, after China’s market regulator imposed fines on Alibaba and Tencent for not complying with anti-monopoly rules on disclosure of transactions. The Nikkei rose, however, trading at an almost 2-week peak, on hopes for political stability as the ruling LDP party boosted their majority in the upper house election.
- European equity futures are down this morning along with their US counterparts as the risk mood soured.
- Oil prices were lower early Monday after posting a loss last week in volatile trading, as concerns about a global recession and potential new virus restrictions in China outweighed persistent supply-side issues. President Joe Biden is scheduled to visit Saudi Arabia this week amid efforts to tame elevated energy prices.
- The US economy added 372k payrolls in June, much better than market forecasts of 268k and only slightly below a downwardly revised 384k in May. Meanwhile, the unemployment rate held steady as expected while the growth in average hourly earnings eased from 0.4% in May to 0.3% in June.
- Elon Musk said late Friday that he was terminating his $44 billion deal to buy Twitter, saying that the social media company had failed to provide information about fake accounts on the platform.
- This week’s investors’ focus will turn to corporate results as the second-quarter earnings season in the US kicks off. On the macro front, US inflation rate, and China and UK GDP growth figures will offer traders fresh updates on the strength of the global economic recovery.