Nervousness over the global economy dominates sentiment

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 a quiet session higher on Thursday, trimming some of the week’s losses.  Choppy action this week has come amid uncertainty regarding the ultimate economic impact of aggressive central bank monetary policy tightening, and as investors speculate on the trajectory of future rate hikes.  The Dow Jones Industrial Average increased 0.6%, the S&P 500 went up 0.8%, and the Nasdaq Composite rose 1.1%.  Elsewhere, European equities ended Thursday’s session broadly flat. 

Summary as at 09.12.2022 

• Asian equity markets mostly rose on Friday, tracking gains on Wall Street overnight, as investors digested data from China showing consumer prices rose 1.6% in November on an annual basis, while producer prices fell 1.3%, largely in line with expectations.  Shares in Australia, South Korea, Japan and Hong Kong advanced, while mainland China shares remained in consolidation. 
• European shares are on course to follow US futures higher, as investors look ahead to the US PPI report later today that could shed further light on the state of US inflation. 

• Oil prices were steady this morning, but were still set to end the week sharply lower as renewed recession fears gripped financial markets, overshadowing optimism around China’s loosening Covid curbs and persistent supply-side concerns.  Prices are down nearly 10% so far this week, having been pressured throughout the period by economic fears as a chorus of top executives in the US sounded the alarm on a potential recession next year. 
• China’s annual inflation dropped to 1.6% year over year (yoy) in November from 2.1% in the prior month, matching market consensus.  This was the lowest figure since March.  On a monthly basis, consumer prices declined by 0.2% in November, the first drop since August, in line with estimates, and after a 0.1% gain in October. 
• The US Securities and Exchange Commission yesterday released new guidance, requiring companies that issue securities to disclose to investors their exposure and risk to the cryptocurrency market. 
• Credit Suisse completed the equivalent of $4.3 billion, two-pronged capital increase, securing the funds needed to embark on a comprehensive restructuring of the troubled lender.  Investors agreed to buy 98.2% of the shares on sale in a rights offer.  The remaining shares will be sold in the market at or above the offer price of 2.52 francs a share.   
• Chevron and Exxon Mobil both said yesterday that their 2023 capital expenditures will be at the high end of their guidance.  Exxon also raised its share buyback guidance to $50 billion from $30 billion 

• Durgmakers GSK, Pfizer, Sanofi and Hoehringer Ingelheim earlier this week defeated thousands of lawsuits in US federal court claiming that the heartburn drug Zantac caused cancer, as a judge found the claims were not backed by sound science.  While the companies, which have all marketed the drug at different times, still face tens of thousands of similar lawsuits in state courts, the ruling in Florida, knock out a significant portion of their potential liability.