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. 

The main US equity indices declined on Monday, with investors treading carefully as fresh economic data and corporate earnings reports to be released this week will shed light on current recession risks. The Dow Jones lost over 160 points, while the S&P 500 and the Nasdaq fell 1.1% and 2.2%, respectively. Sentiment remained clouded by bets that the Federal Reserve will continue to hike interest rates aggressively, recently support by stronger than expected payroll data released last week and expectations that this week’s CPI figure will point to an acceleration in consumer prices. Meanwhile, European equity markets also closed in the red on Monday after three consecutive sessions of gains, with the Euro Stoxx 50 down 1%. 


  • Japanese equities led losses in Asian markets on Tuesday as risk-off sentiment took hold. The Nikkei was down roughly 2% in afternoon trade, the Hang Seng and the Kospi slipped by around 1.2% each, and mainland China markets were on track for two days of declines as fears of stringent Covid measures emerged. Australia’s ASX 200 bucked the trend, gaining around 0.2%. 
  • European and US equity markets head for another negative open amid concerns over the economic outlook and China’s Covid restrictions. 
  • Oil prices plunged near 2% this morning, extending losses from the prior session, as multiple Chinese cities are adopting fresh Covid-19 curbs while mounting worries of a global economic slowdown continued to rattle fuel demand. In the meantime, US President Biden is scheduled to visit Saudi Arabia this week, amid efforts to bring down energy prices. 
  • The euro fell as low as 1.0006 to the US dollar this morning as energy concerns and the risk of recession weighed on the outlook for the euro area, while risk aversion fuelled a broad rally in the greenback. The currency’s downward spiral has been swift and brutal, given it was trading around $1.15 in February. A string of increasingly large interest-rate hikes by the Fed supercharged the dollar, while Russia’s invasion of Ukraine has worsened the outlook for growth in the euro zone. 
  • The UK Conservative Party is seeking to narrow down a wide field of contenders to be Britain’s next prime minister by requiring candidates to have the initial support of 20 Tory MPs. Nominations will open and close on Tuesday, with the first ballot of Conservative MPs to be held on Wednesday. The party’s new leader, and therefore the UK’s next PM, will be announced on 5th September.  
  • Retail sales in the UK decreased 1.3% on a like-for-like basis in June from a year ago, contracting for the fourth straight month as surging inflation continued to hit household spending. Figures were not adjusted for inflation, which is currently running at a 40-year high of 9.1%, masking a larger fall in retail sales. 
  • Most Democratic voters don’t want President Biden to run in 2024, according to a New York Times/Siena College poll. More than three-quarters of registered voters see the US moving in the wrong direction, and Biden’s approval rating is a meagre 33 percent. 
  • India is set to overtake China as the world’s most populous country in 2023, according to a UN report published on Monday. The report said China and India were each home to over 1.4 billion people in 2022. The global human population is expected to reach 8 billion in mid-November 2022 from an estimated 2.5 billion people in 1950, the report says.