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 did an about-face in late-day trading on Wednesday to finish mixed, with the Dow and S&P 500 adding to the previous day’s solid declines. The moves came following the release of the minutes from the Fed’s February 1 monetary policy meeting that showed Committee members remain steadfast in their rate hike campaign despite some cooling in inflationary pressures. The Dow Jones Industrial Average lost 0.3%, and the S&P 500 was down 0.2%, while the Nasdaq Composite gained 0.1%. Meantime, European equity markets closed mostly in the red yesterday, with the benchmark Euro Stoxx 50 down 0.2% as downbeat earnings reports dragged down mining shares and banks while media shares rose. 

Summary as at 23.02.2023 

  • Asian equity markets mostly rose on Thursday as investors assessed the latest Federal Reserve meeting minutes. Meanwhile, the Bank of Korea kept its policy rate unchanged at 3.5% during its February meeting, as the board shifted its attention to supporting the economy after putting a prolonged focus on cost pressures. Shares in South Korea, Hong Kong and mainland China advanced, while Australian equities declined. Japanese markets are closed for the Emperor’s birthday. 
  • European shares are set to rebound and US equity futures rose as well as a selloff spurred by hawkish Fed signals and soft earnings eases. 
  • Oil prices remained under pressure after losing more than 3% on Wednesday as tightening financial conditions heighten the risk of a demand-sapping global recession. 
  • Federal Reserve officials continued to anticipate further increases in borrowing costs would be necessary to bring inflation down to their 2% target when they met earlier this month, though almost all supported a step down in the pace of hikes, according to the minutes of the Jan. 31-Feb. 1 gathering released yesterday. The minutes also said “almost all” officials agreed it was appropriate to raise interest rates by 25 basis points at the meeting, while “a few” favoured or could have supported a bigger 50 basis-point hike. Following the release of the minutes, investors lifted expectations for where rates will peak to around 5.36%. 
  • Palo Alto Networks Inc. reported yesterday adjusted fiscal Q2 EPS of $1.05, topping the $0.78 estimate, as revenues rose 26.0% year-over-year (yoy) to $1.66 billion, versus the Street’s forecast of $1.65 billion. The cybersecurity company’s Q2 billings came in above expectations, as it noted the performance of its software-based and could-delivered portfolio amid macroeconomic challenges. The company issued full-year EPS and billings guidance that came in north of expectations. 
  • Intel Corporation announced it will cut its quarterly dividend by about 66.0% to $0.125 per share as a deliberate approach to capital allocation that is designed to best position the company to create long-term value. The company added that its action is expected to improve financial flexibility and support the critical investments needed to execute its transformation during the period of macroeconomic uncertainty. It also reaffirmed its Q1 guidance. 
  • Nvidia shares rose more than 8% in extended-hours trading yesterday after the semiconductor giant posted fiscal Q4 results that beat expectations, thanks to a rebound in its gaming unit. The company also forecasted Q1 revenue above Wall Street estimates, expecting the artificial intelligence boom to drive up sales of its data centre chips.