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. 

Shares plunged last Friday as Federal Reserve Chairman Jerome Powell gave a brief and blunt message that the Fed plans to keep raising interest rates. His comments sparked a 1,000-point drop in the Dow Jones average and the percentage losses were even steeper on the S&P 500 and Nasdaq Composite. For the week, the S&P 500 fell 4%, giving up all its gains for the month of August, the Dow Jones lost 4.2%, and the Nasdaq slid 4.4%. European equity markets also closed sharply lower on Friday, with the benchmark Euro Stoxx 50 falling nearly 2% on the day and 2.4% for the week. 


  • Shares in Asia traded lower on Monday, with Japan’s Nikkei leading the losses with a drop of over 2.5%. Markets in South Korea and Australia shed around 2% each, while the Hang Seng and the Shanghai Composite also traded in the red, amid disappointing data on China’s industrial profits. 
  • European shares are set to join a global equity selloff as US futures are seen extending losses from late last week. 
  • Oil prices were steady this morning after rising roughly 3% last week, as various supply-side issues countered fears that aggressive central bank action against inflation would lead to a global economic slowdown. 
  • During his speech at the Jackson Hole symposium, Fed Chair Powell said that that reducing inflation is likely to require a sustained period of below-trend growth but failure to restore price stability would mean far greater pain. Powell also said that another unusually large increase could be appropriate at the next meeting but the decision will depend on incoming data. 
  • Personal spending in the US edged up a meagre 0.1% month-over-month in July, after jumping 1% in June, and below forecasts of 0.4%. It is the weakest performance so far this year, as consumption increased for services, namely housing, and international travel but declined for goods, namely fuel and other energy goods. 
  • The risk of Chinese equities delisting from US exchanges has nearly halved, according to Goldman Sachs analysts, after the Chinese and US regulators announced Friday that both sides signed an agreement for cooperation on inspecting the audit work paper of US-listed Chinese companies. 
  • Profits earned by China’s industrial firms declined by 1.1% year-on-year in the first seven months of the year, reversing from a 1.0% growth in the previous period, as the economy continued to grapple with Covid-19 disruptions and an energy crunch due to heatwaves. 
  • Economic reports due this week include updates on consumer confidence, construction spending, and vehicle sales, which will all arrive before the big August jobs report drops at the very end of the week. The US jobs report for August is expected to show 300k jobs adds for the month and an unemployment rate that holds steady at 3.5%.