Markets seen steady after posting sharp weekly losses

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 ended Friday’s session and the week lower as the markets reacted to a Fed-favoured gauge of inflation that came in hotter than expected. PCE and Core PCE Price Indices rose more than anticipated, while personal income increased less than expected, and spending jumped. The moves came as equities have shown some volatility amid festering uncertainty regarding the ultimate economic impact of aggressive global central bank tightening as a result of persistent inflation. The Dow Jones Industrial Average decreased 1.0% on Friday, the S&P 500 Index fell 1.1%, and the Nasdaq Composite was down 1.7%. For the week, the Dow dropped almost 3% marking the fourth straight losing week. The S&P 500 lost 2.7%, booking its worst week since Dec. 9. and the Nasdaq ended 3.3% lower, notching its second negative week in three. Shares in Europe were lower across the board on Friday, with the Euro Stoxx 50 index retreating 1.9% to a three-week low and ending the five-day stretch lower by 2.3%. 

Summary as at 27.02.2023 

• Asian equity markets fell on Monday tracking losses on Wall Street as investors monitored key economic developments in Asia, with BOJ governor nominee Kazuo Ueda set to appear before the upper house today. Shares in Australia, Japan, South Korea, Hong Kong and China declined. 
• European shares are poised to edge higher following Friday’s plunge while US equity futures were little changed in the early hours of Monday. 
• Oil prices kept to a tight range this morning amid persistent concerns over high inflation and rising US interest rates, while traders awaited more cues on demand from key Chinese economic readings this week.  
• Personal income in the US rose 0.6% month-on-month in January, below the consensus forecast of a 1.0% increase, while December’s figure was upwardly revised to 0.3% rise. Personal spending increased 1.8%, ahead of the Street’s expectation for a 1.4% gain, and compared to the prior month’s positively adjusted 0.1% decrease. The January savings rate as a percentage of disposable income was 4.7%, up from December’s positively revised 3.4% rate. 
• Also in the US, the PCE Deflator rose 0.6% month-on-month, above expectations for a 0.5% rise, and compared to December’s upwardly adjusted 0.2% gain. Compared to last year, the deflator was 5.4% higher, compared to estimates of a 5.0% increase, and compared to the prior month’s upwardly adjusted 5.3%. 
• Rishi Sunak and Ursula von der Leyen will meet in the UK this afternoon for final talks ahead of an expected announcement of a post-Brexit settlement for Northern Ireland. The meeting suggests the UK and the European Union are finally ready to settle their differences over a stand-off that has persisted since the UK’s departure from the EU single market and customs union in 2021.  
• Cisco is working with Mercedes Benz to add its Webex conferencing tools to the dashboard of vehicles, the company said on Monday, as it seeks to turn the car into a mobile office. The 2024 Mercedes-Benz E Class will be equipped with Wi-Fi and a cellular data connection, meaning drivers can download the Webex application to appear directly on the touchscreen of the vehicle’s infotainment system without needing a mobile phone. 
• Pfizer is in early talks to acquire drugmaker Seagen Inc, the Wall Street Journal reported late on Sunday. Seagen has a market value of some $30 billion and was in advanced talks last year to be acquired by Merck, in a deal that would have been worth $40 billion or more, but the two sides failed to reach an agreement.