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.
European equity markets extended gains for a third session Thursday, with the Euro Stoxx 50 closing at the highest in eight months, led by gains in chemicals shares. Meanwhile, investors digested contradicting messages from the ECB and the Fed in their latest meeting minutes. While the Federal Reserve signalled it would soon be appropriate to slow the pace of interest rate hikes, officials in Europe remained committed to raising rates, even in a case of a recession. US markets were closed yesterday for the Thanksgiving holiday.
Summary
- Asian equity markets mostly fell in muted trade on Friday following a holiday in the US, as surging Covid cases in China hurt regional sentiment, overshadowing hopes for more stimulus in the country. Shares in Hong Kong, South Korea, and Japan declined, while mainland China shares were mixed. Australian and New Zealand shares rose.
- European equity futures are indicating a subdued market open while US equity markets will only be open for a couple of hours.
- Oil prices were marginally higher on Friday but were still set to end the week lower due largely to concerns about Chinese demand and reports of a high price cap by G7 nations on Russian oil that eased supply worries.
- European Central Bank policymakers agreed that the central bank should continue normalising and tightening monetary policy to combat high inflation, even in the event of a shallow recession, the accounts of the central bank’s October meeting showed. Officials noted that the inflation outlook continued to worsen, with inflation far too high and repeatedly above the projected figures, with an increasing risk that it might become entrenched.
- Elon Musk said Twitter will vastly expand the reinstatement of banned users from next week in a major reversal of the site’s content-moderation policies. In response to a poll conducted by Musk, about 72% of participants voted in favour of a “general amnesty” for suspended accounts on Twitter “provided that they have not broken the law or engaged in egregious spam.” Musk on Thursday said the amnesty will begin next week.
