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. 

The Dow shed more than 230 points on Thursday, while the S&P 500 and the Nasdaq 100 closed roughly 0.8% and 1% lower, respectively as selling pressure prevailed amid concerns of a looming recession. Fresh data showed that the labor market remains tight, with the number of Americans filing for unemployment benefits falling last week to the lowest in four months, backing hawkish remarks from Federal Reserve officials who signal further rate hikes.  Elsewhere European equity markets snapped a 6-day winning streak yesterday, with the benchmark Euro Stoxx 50 down almost 2% from Wednesday’s 11-month high and ending the longest winning streak since November 2022. 

Summary as at 20.01.2023 

  • Asian equity markets rose on Friday amid economic optimism stemming from China’s reopening.  Investors also digested data showing Japan’s annual core CPI jumped to a fresh 41-year high of 4% in December, while China’s central bank kept its key lending rates unchanged for the 5th straight month.  Meanwhile, investors remain cautious ahead of the week-long Lunar New Year holidays in China due to the risk of an unexpected event while mainland markets are shut.   
  • Equities on both sides of the Atlantic are on track to reclaim some of Thursday’s losses as traders weigh the outlook for earnings and global growth. 
  • Oil prices traded higher this morning and were set to gain for the 2nd straight week, underpinned by an improving demand outlook in China and supply worries stemming from tightening sanctions on Russian flows.  The International Energy Agency said that global consumption will likely reach a record daily average this year as China lifted strict Covid curbs, while price cap sanctions on Russia could dent supply.  Goldman Sachs argued that solid demand growth could send oil prices above $100 in 2023, while JPMorgan Chase issued a more cautious outlook due to economic fears in the West. 
  • Two top Federal Reserve officials said high-interest rates were needed to keep pressuring inflation that’s showing signs of slowing, but is still too rapid.  “Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2% on a sustained basis,” Vice Chair Lael Brainard said Thursday. 
  • The Biden administration announced a major new package of military hardware for Ukraine, sending 90 Stryker armored personnel carriers, 59 Bradley fighting vehicles, and an array of other gear as western allies look to give the country a boost before Russia launches a new ground campaign expected this spring. The $2.5 billion package includes millions of rounds of ammunition, tens of thousands of artillery rounds, night vision gear, and other equipment, the Pentagon said. It marks the 30th drawdown from Defense Department stocks since the war began. 
  • Netflix co-founder Reed Hastings is stepping down as CEO of the company he’s led for more than two decades, leaving the position to his two long-time associates, Ted Sarandos and Greg Peters. Sarandos, who was already co-CEO, is the company’s public face in Hollywood while Peters, previously chief operating officer, has overseen its product development and push into advertising. Hastings, 62, will serve as executive chairman of the company.  Meanwhile, in extended trading yesterday, Netflix shares jumped 7% on better-than-expected subscription figures. 
  • Procter & Gamble Company reported adjusted fiscal Q2 EPS of $1.59, in line with estimates, as revenues dipped 1.0% year-over-year (yoy) to $20.77 billion, compared to the Street’s forecast of $20.73 billion. The company said it delivered solid results in Q2 in what continues to be a very difficult cost and operating environment. It said sales were negatively impacted by foreign exchange, though organic sales rose 5.0% yoy, driven by a 10.0% increase from higher pricing and 1.0% increase from positive product mix, partially offset by a 6.0% decrease in shipment volumes. The company reaffirmed its full-year earnings outlook and raised its revenue growth outlook.