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 closed higher yesterday, extending the rally from late last week, as Q4 earnings season is set to shift into high gear today. The markets also prepared for next week’s Fed monetary policy decision, with the Central Bank expected to slow down on their tightening campaign. The Dow Jones Industrial Average rose 0.8% to 33,630, the S&P 500 Index advanced 1.2% to 4,020, and the Nasdaq Composite increased 2.0% to 11,364. In Europe, equity markets also started the week on a positive note, with the benchmark Euro Stoxx 50 rising 0.7%, led by an over 2% advance in tech shares. 

Summary as at 24.01.2023 

  • Asian equity market rose on Tuesday as investors digested regional data which signalled to slow economic activity.  Shares in Australia and Japan advanced, while markets in China, Hong Kong, South Korea and Singapore remain shut for Lunar New Year celebrations. 
  • European equities are poised to edge higher while US equity futures were little changed in early morning trade as investors continue assessing wagers for a Fed downshift. 
  • Oil prices advanced this morning, hovering close to the highest levels in seven weeks, underpinned by hopes for a demand recovery in China and expectations of less aggressive central bank policy tightening. Last week, both the IEA and OPEC offered a bullish outlook for 2023, saying that the reopening of the Chinese economy will boost demand. 
  • The au Jibun Bank Japan Manufacturing PMI stood at 48.9 in January, unchanged from December’s 26-month low, and below market expectations of 49.4, a preliminary figure showed. This was the third straight month of decline in factory activity, amid weak demand and sustained reductions in output and new orders. 
  • The Judo Bank Flash Australia Manufacturing PMI posted 49.8 in January, down from a final reading of 50.2 in the previous month, marking the first contraction of the manufacturing sector in 32 months. 
  • The US Conference Board’s Leading Economic Index for December fell 1.0% month-over-month, worse than the consensus estimate calling for a 0.7% decline, and compared to November’s negatively revised 1.1% drop.  The report continued to signal a recession for the US economy in the near term as there was a widespread weakness among leading indicators in December, indicating deteriorating conditions for labour markets, manufacturing, housing construction, and financial markets in the months ahead. 
  • The consumer confidence indicator in the Euro Area rose by 1.1 points to -20.9 in January, the highest since February 2022 on hopes lower energy prices and recovery fund spending might help avoid a recession this year. Still, the reading came in below market expectations of -20, preliminary estimates showed. 
  • Christine Lagarde said the European Central Bank will do everything necessary to return inflation to its goal, pointing to more “significant” interest-rate increases at coming meetings. Borrowing costs will have to rise at a steady pace to reach levels that are sufficiently restrictive, and stay at that point for as long as needed, Lagarde said Monday 
  • Spotify announced yesterday it will be cutting 6% of its global workforce as the music streaming company contends with a gloomy economic environment that has seen consumers and advertisers alike limit their spending. Spotify has a total workforce of around 9,800 people, which means the cuts will impact about 600 employees. 
  • Ford plans to trim about 3,200 jobs across Europe following workforce reductions in the US as the automaker slashes costs in a shift toward electric vehicles. A majority of the affected positions are concentrated in Germany. The cuts would affect roughly 65% of development jobs in Europe.