Ongoing Markets Commentary: Oil surges amid more Russian sanctions

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 globalisation and further fuel higher structural inflation. 

US stocks fell on Monday as investors grew increasingly concerned a three-year high in the benchmark US 10-year Treasury yield would start to slow the economy, and looked ahead to the upcoming earnings season for signs of what impact inflation is having on corporate profits.  Tech stocks weighted on Wall Street as the Dow Jones Industrial Average fell 1.2%, the S&P 500 lost 1.7% and the Nasdaq Composite dropped 2.2%.  European markets were also lower as investor dumped riskier shares in anticipation of an aggressive tightening from major central banks. 

Summary

• Asian shares slipped this morning as investors continue monitoring developments surrounding the Covid situation in China. 
• European stocks are poised to fall at the open, while their US counterparts are seen opening with a positive bias. 
• Oil surged 2% on Tuesday, amid the potential for more sanctions on Russia’s energy sector and warning from OPEC that it would be impossible to increase output enough to offset lost supply.   
• Chinese regulators have approved the first batch of video games for monetisation since last July, ending a freeze that has hurt some of China’s largest technology firms.  The approval potentially indicates a slightly more favourable view from regulators toward the gaming industry after months of headwinds amid regulatory tightening in China across the technology sector. 
• China is encouraging long-term investors to buy more equities and major shareholders of listed firms to increase their holdings when stocks slump, in a bid to stabilise a stock market rocked by a worsening Covid-19 outbreak. 
• The US government ordered all non-emergency staff at its Shanghai consulate and their families to leave the Chinese city due to a surge in Covid cases and lockdown measures imposed on the financial hub.   
• Retail sales in the UK decreased 0.4% on a like-for-like basis in March from a year earlier, turning negative for the first time since October and following a 2.7% gain in the previous month. 
• Twitter employees are said to be “super stressed” after Elon Musk backed away from a plan to join the company’s board over the weekend.  For some, the reversal signaled chaos as they are unsure whether the billionaire is friendly or hostile.  The company canceled a Q&A with Musk after he decline a board seat, and Twitter CEO Parag Agrawal warned of “distractions ahead.”