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 fell on Wednesday as Treasury yields rose above the psychologically important 3% level and oil prices jumped, fanning worries about inflation and the outlook for interest rates. The Dow Jones fell 270 points, the S&P 500 shed 1.1% and the Nasdaq retreated 0.7%. In Europe, equity markets fell for a second day yesterday, dragged by industrials and financials shares. 

Summary

  • Shares in Asia were mixed in Thursday trade, with investors watching for market reaction to China’s trade data for May that performed above expectations. Gains were mainly concentrated in Japan, as markets in China, Hong Kong, South Korea and Australia were all trading lower. 
  • European equities are poised to join a global selloff amid renewed concerns on inflation while US stock futures are pointing to a flat open at this point in the day. 
  • Oil prices held steady this morning after advancing by more than 2% in the previous session, as US demand for gasoline keeps rising despite record prices at the pump. 
  • China’s exports rose by 16.9% yoy to a four-month high in May, exceeding market forecasts of 8% and picking up sharply from a 3.9% rise a month earlier. In the meantime, imports rose by 4.1%, picking up from stagnation in April, as domestic demand started to recover. 
  • The ECB is set to announce an imminent end of large-scale purchases when in meets today, paving the way for the first increase in interest rates in more than a decade next month. 
  • The OECD slashed its 2022 global growth projection to 3% from 4.5% set out previously.  It expects growth will slow further to 2.8% in 2023.  The group boosted its average inflation forecast for member countries to 8.5% this year and 6% in 2023 versus 5% and 3% prior estimates, respectively. 
  • Shares of Intel tumbled 5% yesterday after management warned of weakening demand for semiconductors. 
  • Twitter plans to hold a shareholder vote by early August on its $44 billion sale to Elon Musk, as it continues to work “constructively” to complete the deal according to company’s sources