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 markets ended mostly higher helped by some upbeat earnings results in the region.  Two major firms; CVS Health Corp and Uber surged more than 3.4% and 5.5%, after upbeat earnings results. On the flip side, all three major US equity indices closed in negative territory on Wednesday, as investors were concerned about the impact of a slowing economy on corporate profits and digested comments from Fed Powell on Tuesday. The Dow Jones lost 0.6%, and the S&P 500 dipped 1.1%. The Nasdaq shed almost 1.7% due to a heavy selloff in tech, led by an over 7.6% loss by Alphabet after its new Ai chatbot Bard delivered an incorrect answer in an online advertisement. Also, Amazon and Meta were down 2.2% and 4.3% respectively, while Microsoft finished slightly higher after the software giant said it was updating its Edge web browser and Bing search engine with artificial intelligence.  

Summary as at 09.02.2023 

  • Asian equity markets were mixed on Thursday as investors braced for corporate earnings from major companies in the region including Toyota, Nissan and SMIC. Shares in Australia and Japan fell, while Hong Kong and China equities gained. 
  • European shares are on track to nudge higher, similar to their US counterparts even though sentiment remains fragile after hawkish remarks from Fed officials. 
  • Oil prices remained flat this morning after rallying in the previous three sessions, as investors digested the latest Federal Reserve commentary and mixed reports on US crude stockpiles. EIA data on Wednesday showed that US crude inventories increased last week, in contrast with an API report on Tuesday showing a surprise decline. 
  • Federal Reserve officials stressed the need to keep raising interest rates, including the potential for borrowing costs to peak at a higher level than previously expected amid ongoing price pressures. Their hawkish comments come as investors reassess bets on how high the Fed will raise rates, with some wagering the peak could reach 6% — from 4.6% currently — following a red-hot January employment report and remarks by Fed Chair Jerome Powell on Tuesday.  
  • US President Joe Biden asserted in an interview that Vladimir Putin has “already lost Ukraine.” In a wide-ranging interview on Wednesday night, Biden added that he was proud that “I’ve been able to unite NATO completely” since the Russian invasion of Ukraine began nearly a year ago. Ukrainian President Volodymyr Zelenskiy, toward the end of a day that took him to the UK and France, met with German Chancellor Olaf Scholz and Emmanuel Macron in Paris on Wednesday night, using the meeting to request more weapons, including long-range missiles and fighter planes. 
  • The Borsa Istanbul 100 index suspended trading on Wednesday for the first time in 24 years after plunging more than 7% to below the 4190 level, the weakest in nearly three months. The index entered bear-market territory on Tuesday and is now down 16% on the week following the earthquake that hit Turkey on Monday. Prior to the earthquake, the Bist 100 had already lost almost 14% this year, falling from a record high of 5,661 on January 2nd and after a nearly 200% surge in 2022. Political and monetary policy uncertainty was weighing on the market ahead of key presidential and parliamentary elections in May.  
  • Money managers have cut $300 billion of bearish bets and are now positioned more in line with historic norms — robbing the market of pent-up demand just as the Federal Reserve warns its inflation-fighting battle is far from over. The shift in positioning has taken a broad array of investors from underweight to holding equities closer to the average of the past decade. Investors are now the closest to neutral positioning than they have been since the second quarter of last year, when the Fed began ramping up interest rates. 
  • Toyota Motor Corp this morning posted a surprise 22% rise in Q3 operating profit, helped by a weaker yen and some easing of the global chip shortage. 
  • UK regulators are challenging Microsoft’s acquisition of Activision Blizzard for around $69 billion. The UK Competition and Markets Authority said it took an initial view that the deal could result in a substantial lessening in competition, higher prices, fewer choices or less innovation for U.K. gamers.  
  • Uber Technologies Inc. posted Q4 EPS of $0.29, versus the Street’s expectation of a $0.15 per share loss, with revenues growing 49.0% year-over-year to $8.61 billion, compared to the estimated $8.51 billion. The company said it ended 2022 with its strongest quarter ever, with robust demand and record margins. It also issued Q1 guidance for its bookings that had a midpoint that was above expectations.  
  • Walt Disney’s q1 financial results topped estimates after hours yesterday, while it plans to cut 7,000 jobs and introduce a new organizational structure. Adjusted EPS fell to $0.99 during the three months ended Dec. 31 from $1.06 a year earlier, compared with the consensus for $0.79. Revenue increased 8% to $23.51 billion, above the Street’s $23.28 billion view.