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. 

Wall Street ended sharply lower on Friday, extending losses for a third consecutive session after hotter-than-expected inflation data gave support to bets that the Federal Reserve will continue to hike rates aggressively. The Dow was down 4.6% for the week, while the S&P 500 and Nasdaq Composite slumped 5.1% and 5.6%, respectively. European bourses also closed sharply lower on Friday, with losses of around 3% for the day and 4% for the week. 


  • Shares in Asia plunged on Monday, with stocks in Japan, South Korea and Hong Kong all sinking around 3%, each. Meanwhile, the Shanghai Composite slid nearly 1% after China warned of a rapid Covid spread in Beijing city and planned for mass testing. Markets in Australia were closed for a holiday. 
  • Oil prices fell around 2% this morning, sliding for the third straight session, as investors weighed the prospects of further US interest rate hikes to combat surging inflation and the potential for more Covid curbs in China. 
  • European and US stocks are set to fall at the open as markets struggle to recover from one of their worst weeks of 2022.  
  • US consumer price inflation rose 1.0% mom in May, above expectations of a 0.7% gain, and compared to April’s 0.3% increase. The core rate increased 0.6% mom, north of forecasts calling for a 0.5% rise and matching April’s increase. Compared to last year, prices were 8.6% higher for the headline rate, above estimates calling for the rate to match the prior month’s unrevised 8.3% rise.   
  • The dollar index climbed toward 104.5 on Monday, inching closer to its highest levels in 20 years as investors bet on even more aggressive monetary tightening by the Fed. 
  • Chinese carmaker Nio will start producing its own battery packs for electric vehicles, cutting its reliance on suppliers amid the strong demand for batteries in the EV sector. 
  • All eyes this week will be on the Fed as it is expected to deliver its second straight half-point rate increase when it meets on Wednesday. Following the hot CPI report, the odds for a 75-point rate hike jumped to 20% from 5% to add some intrigue to the meeting. Investors will also be watching moves from other major central banks, with the Bank of England set to lift interest rates again and the Bank of Japan expected to retain its ultra-dovish stance despite a rapidly falling yen.