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 equity indices closed lower on a choppy Wednesday, as hotter than expected inflation added to expectations that the Federal Reserve will remain in its aggressive monetary tightening path. The Dow Jones fell 180 points and the S&P 500 closed 0.4% lower. The Nasdaq closed marginally below the flatline amid some resilience in the tech sector, with sharp rebounds from Netflix and Tesla. In the meantime, European equities came under renewed selling pressure yesterday, with the Euro Stoxx 50 falling roughly 1% as high inflation data in the US boosted concerns that the eurozone economy will slow dramatically or even enter a recession amid tightening financial conditions and an energy crisis.  


  • Shares in Asia gained on Thursday, lifted by reports that June’s exports from China grew the most in five months amid an easing of supply chain issues and port congestion. The Shanghai Composite was up modestly and the Hang Seng snapped three-day falls ahead of a slew of China’s economic data for June and Q2 GDP figures on Friday. Equities in Australia also moved higher, as the jobless rate hit a new low of 3.5% in June. 
  • European shares are on track to nudge higher while US stock futures were pointing to a lower open early this morning. 
  • Oil prices ticked down on Thursday as hotter than expected US inflation data raised the prospect of more aggressive Federal Reserve tightening, escalating fears of a demand-sapping recession and overshadowing concerns over tight supply.   
  • The annual inflation rate in the US surged to 9.1% in June, the highest since 1981 and well above market expectations, driven by a surge in gasoline and food costs. Fed funds futures reacted to the data by pricing an 81bps increase in July, pointing to some fresh bets of a 100bps rate hike. 
  • The euro area’s rebound from the pandemic will be weaker than anticipated while inflation will be faster because of Russia’s war in Ukraine, according to draft projections by the European Commission. GDP is likely to advance 2.6% this year and 1.4% in 2023 – down from May predictions. Inflation, already at more than four times the ECB’s 2% target, is now seen at 7.6% in 2022 and 4% next year. A recession in Europe might be inevitable and that adds to the task of the ECB. 
  • Central banks across the globe are speeding up interest-rate hikes. Canada hiked a greater-than-expected full percentage point, South Korea raised by a half point after several quarter-point moves, Singapore’s central bank unexpectedly tightened monetary policy and the Fed could weigh a historic 100-basis-point hike this month. It’s a pace that none had pencilled in just a few months ago and it will likely deliver a growth shock that increases the risk of recession. 
  • The UK Conservative Party will hold another ballot Thursday in the contest to elect a new leader and Britain’s next prime minister, after the first round of voting saw ex-Chancellor Rishi Sunak and Trade Minister Penny Mordaunt emerge as front-runners. 
  • Delta Air Lines reported fiscal second-quarter profit below estimates as the carrier incurred higher costs, but revenue rose above pre-pandemic levels and topped analysts’ forecasts. Shares fell 4.5% and were among the steepest declines in the S&P 500.