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 climbed out of a deep hole to finish just below the unchanged mark yesterday in the wake of the biggest two-day rally since April 2020. The Dow Jones declined 0.1%, the S&P 500 lost 0.2%, and the Nasdaq Composite shed 0.3%. Elsewhere, major European bourses were broadly lower, with the Euro Stoxx 50 Index down by just over 1%.
Summary
- Asian equity markets traded mixed on Thursday, with shares in Australia, New Zealand, and Hong Kong in the red, while Japanese and South Korean shares extended recent gains. Meanwhile, markets in mainland China remain shut for the Golden Week holiday.
- European shares are set to follow the late comeback on Wall Street overnight as US futures are also pointing to a positive start when trading resumes on Thursday.
- Oil prices rose this morning to trade at 3-week peaks after OPEC+ agreed to its largest cuts to production since the 2020 Covid-19 pandemic despite pressure from Washington to increase supply. In the meantime, US oil stockpiles fell last week, the second straight drop and the biggest in five weeks.
- In the US, Treasury yields rose, with the yield on the 2-year note gaining 5 bps to 4.13%, the yield on the 10-year note up 14 bps to 3.76%, and the 30-year bond rate increasing 8 bps to 3.76%.
- US private sector payrolls rose by 280,000 jobs in September, slightly above forecasts calling for a 200,000 gain. The report, which does not include government hiring and firing, comes ahead of Friday’s broader September nonfarm payroll release, which is expected to show headline employment rising by 263,000, the unemployment rate remaining stable at 3.7% and average hourly earnings are projected to rise 0.3% month-over-month and up 5.0% year-over-year.
- Also in the US, the ISM Services Index declined by a smaller amount than expected and stayed in expansion territory. The index went down to 56.7, slightly below the 56.9 reading in August, and versus expectations of a decrease to 56.0.
- Russia could cut its oil production by as much as 3 million barrels per day if the European Union and US proceed with a plan to cap prices, market experts have warned. The comments come as EU countries on Wednesday reached a comprise on a new package of Russian sanctions. The EU pact includes support for the price cap on oil sales to third countries.
- Ukraine has joined Spain and Portugal in their bid to host the 2030 World Cup. The partnership between the three countries was confirmed by leaders of the countries’ three football federations at UEFA headquarters.
- Exxon Mobil provided an update on its Q3 earnings performance yesterday, which showed that its refining profit margins will be lower quarter-over-quarter, as crude prices fall, through its natural gas profits would be higher. Shares rose by 4% during regular trading.
