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 erased almost all gains in the last hour of trading on Monday, with the Dow Jones turning negative after rising more than 200 points and S&P trading near the flat line after hawkish comments from two Fed officials brought down hopes that the Federal Reserve might dial back its’ aggressive monetary tightening. Still, the Nasdaq kept a 0.5% gain pushed by a rally in Tesla shares as investors took advantage of low valuations. Meantime, European equity markets extended gains yesterday, as the Euro Stoxx 50 rose by 1.3%, the highest since late February 2022, led by policy-sensitive tech shares and luxury brands with exposure to China. 

Summary as at 10.01.2023 

  • Asian equity markets were mixed on Tuesday as hawkish remarks from Fed officials countered hopes that the US central bank might dial back its aggressive monetary tightening. Meanwhile, growing expectations that inflation may be easing helped technology and growth shares. Equity markets in Australia, Hong Kong and China fell, while those in Japan and South Korea rose. 
  • European equities are primed for losses at the open while futures markets in the US were little changed in early morning trade. 
  • Oil prices were lower this morning, snapping a three-day advance as the hawkish remarks from US Federal Reserve officials outweighed hopes for a demand recovery in China. 
  • San Francisco Fed President Mary Daly said yesterday a half-percentage-point interest rate hike, or a quarter-percentage-point increase, are both possibilities for the US central banks’ Jan 31 to Feb 1 meeting. Moreover, she expects the central bank to raise rates to somewhere above 5%. Meantime, Fed Raphael Bostic noted that policymakers should hike above 5% by early in the second quarter and then go on hold for a long time. 
  • Retail sales in the UK increased 6.5% on a like-for-like basis in December from a year ago, accelerating from a 4.1% rise in November amid higher cost of goods and the Christmas boost, but the rate of growth lagged behind inflation. December’s figure was also the highest since January but remained well below the pace of UK inflation which surged 10.7% in November. 
  • Lululemon Athletica Inc. Lowered the high end of its Q4 EPS and revenue guidance while cutting its outlook for gross profit margin amid a “dynamic macro-backdrop.” The company did note that in Q4, traffic remained strong across both physical and digital channels. 
  • Macy’s Inc. announced that it expects Q4 revenue to be at the low-end to mid-point of its previously issued guidance, noting that Balck Friday/Cyber Monday sales were in line with expectations. Still, the lulls of the non-peak holiday weeks were deeper than anticipated. The company added that based on macroeconomic conditions and its proprietary card data, it believes the consumer will continue to be pressured in 2023, particularly in the first half. 
  • Pfizer clarified that it is not in talks with Chinese authorities to license a generic version of its Covid-19 treatment Paxlovid for use there, but is in discussions about a price for the branded product. The company’s CEO Albert Bourla said that the company had shipped thousands of courses of the treatment in 2022 to China and in the past couple of weeks, had increased that to millions.