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 Jones finished roughly 40 points higher on Wednesday, while the S&P 500 and the Nasdaq added 0.2% and 0.9%, respectively, as investors weighed January retail sales and inflation data while remaining cautious about prolonged rate hikes. The Commerce Department report showed retail sales rebounded 3% in January, the sharpest one-month increase since March 2021, in the latest sign of consumer resilience and complicating the Federal Reserve’s task to cool the economy.  In Europe, equity markets also ended higher, with the Euro Stoxx 50 up 1% led by construction and industrial shares. 

Summary as at 16.02.2023 

  • Asian equity markets rose on Thursday as investors digested data showing Japan posted a record trade deficit of 3.5 trillion yen in January, while machinery orders in the country remained subdued in December. Elsewhere, the unemployment rate in Australia unexpectedly increased to 3.7% in January from 3.5% in December, while home prices in China declined for the ninth straight month in January. Shares in Australia, Japan, South Korea, Hong Kong and mainland China all advanced. 
  • European and US shares are on track to rise as investors assess the potential policy implications of fresh US economic data. 
  • Oil prices gained some ground this morning, snapping a two-day decline as investors shrugged off official data showing US crude inventories jumped by 16.3 million barrels last week, far exceeding expectations of a 1.2-million-barrel build. An upbeat demand outlook from the International Energy Agency also supported prices, predicting that global oil demand will rise by 2 million barrels per day in 2023. The IEA also said that China will account for almost half of the year’s oil demand growth after the country exited its strict zero-Covid policy.  
  • Retail sales in the US unexpectedly jumped 3% month-over-month in January, the biggest increase since March 2021 and way above market forecasts of a 1.8% rise. It follows a 1.1% drop in December. 
  • The annual inflation rate in the UK fell to 10.1% in January from 10.5% in December, below market forecasts of 10.3%. Inflation fell for a third consecutive month to the lowest since September last year. Compared to the previous month, the CPI fell 0.6%, the first decline in a year and the biggest since January 2019.  
  • Cisco Systems’ fiscal Q2 results surpassed Wall Street’s estimates as product sales provided a boost, and lifted its full-year guidance late on Wednesday. Adjusted EPS rose to $0.88 during the three-month ended Jan. 28 from $0.84 a year earlier, compared with the consensus of $0.86. Revenue gained 7% to $13.59 billion, higher than Steet’s $13.41 billion view. The company forecasts fiscal 2023 adjusted EPS of $3.73 to $3.78, compared with the previous outlook for $3.51 to $3.58 and analysts’ $3.55 estimate.  
  • Standard Chartered this morning raised a key performance metric and announced a new $1 billion share buyback after posting a 28% rise in annual pre-tax profit as global interest rate hikes boosted its lending revenue. The Bank now expects to achieve a return on tangible equity of 10% this year and 11% in 2024. It had previously targeted 10% for 2024. The Asia, Africa, and Middle East-focused bank reported a statutory pre-tax profit of $4.3 billion for 2022 which was below the $4.73 billion average of analyst forecasts. 
  • Kraft Heinz Company yesterday reported adjusted Q4 earnings of $0.85 per share, above the expected $0.78, as revenues increased 10.0% year-over-year to $7.38 billion, compared to the forecasted $7.26 billion. The company’s organic sales grew 10.4% yoy. KHC’s full-year EPS guidance came in below expectations, including negative impacts from unfavourable changes in non-cash pension and post-retirement benefits and, and currency headwinds. The company said it anticipates single-digit inflation for the year, with pricing and gross efficiencies contributing to adjusted gross profit margin recovery. 
  • A China-based former employee of ASML Holding stole data from a software system that the corporation uses to store technical information about its machinery. The breach occurred in a repository that includes details of the lithography systems critical to producing some of the world’s most advanced chips.