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 tumbled on Tuesday following comments from Fed Chair Powell’s semi-annual two-day Congressional testimony.  Powell suggested that rates may need to go higher for longer and could accelerate in order to curb inflation, which appeared to fuel fears of a potentially larger-than-expected rate hike at the next policy meeting.  The Dow Jones Industrial Average decreased 1.75% to 32,856, the S&P 500 Index was 1.5% lower at 3,986, and the Nasdaq Composite lost 1.3% to 11,530.  European markets also ended lower, with the Euro Stoxx 50 Index down 0.8% to 4,279 points. 

Summary as at 08.03.2023 

  • Asian equity markets mostly fell on Wednesday, tracking overnight losses on Wall Street.  Meanwhile, Reserve Bank of Australia Governor Philip Lowe said the central bank is closer to reaching a point where it will be appropriate to pause interest rate increases as monetary policy has become restrictive.  In Japan, data showed that the country posted a record current account deficit in January as stubbornly high energy costs pushed up import bills.  Shares in Australia, South Korea, Hong Kong and mainland China declined, while Japanese equities edged higher. 
  • European shares face a rocky open this morning after the hawkish comments from Jerome Powell while US futures were seen steady after the sharp falls experienced yesterday. 
  • Oil prices recovered a measure of recent losses this morning on the prospect of tightening US supplies, although fears of rising interest rates, following hawkish signals from the Federal Reserve, still weighed on sentiment.  Data from the American Petroleum Institute showed that US crude inventories likely saw their first decline last week after 10 straight weeks of builds, heralding a similar trend from government data due later in the day. 
  • Chair Jerome Powell said yesterday the Federal Reserve is likely to lift interest rates higher and potentially faster than previously anticipated with inflation persisting, an unexpectedly aggressive posture following last month’s step down in the pace of hikes.  Markets are now priced for a 70% chance of a 50-basis point rate hike in March, up from a 30% change a day ago.  The dollar scaled multi-month highs against all major currencies, with the most pronounced buying activity against the Australian dollar. 
  • Twitter CEO Elon Musk said on Tuesday that the company could be cash flow-positive next quarter, as the social media platform has been aggressively cutting costs.  Musk said it was “startling” how poorly Twitter managed to make money off its messaging service.  The company has reduced its non-debt expenditure to $1.5 billion from a projected $4.5 billion in 2023, helped by cutting its cloud services bill by 40% and closing one data centre while laying off thousands of employees. 
  • Warren Buffett’s Berkshire Hathaway added to its already large Occidental Petroleum stake over the past trading sessions, a regulatory filing revealed Tuesday evening.  The company bought nearly 5.8 million shares of the oil company in a few separate trades on Friday, Monday, and Tuesday, paying prices in the range from $59.8 to $61.9, the filing showed.