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 regained ground on Wednesday, with the Dow closing 303 points higher, the S&P 500 climbing 1.5% and the Nasdaq up 2.5%, after the Federal Reserve escalated its battle against inflation.  Market moves came along with declining Treasury yields, which, in turn, drove investors into growth stocks.  Meantime, European shares snapped a six-day selloff to end Wednesday’s session higher, driven by gains in the financial and technology sectors. 


  • Asian markets rallied this morning with both the Nikkei in Japan and the Kospi in Seoul jumping more than 1%. 
  • European equities are set for a positive start as US stock futures are also pointing higher. 
  • Oil prices recovered on Thursday from a steep drop in the previous session, supported by tight oil supply and peak summer consumption, after a US rate hike sparked fears of slower economic growth and less fuel demand. 
  • The Federal Reserve raised the target for the fed funds rate by 75bps to 1.5%-1.75% during yesterday’s meeting. This is the biggest rate hike since 1994 and Chair Powell signaled a similar move could come at the next meeting but he does not expect 75bps moves to be common. 
  • Fed policymakers see interest rates increasing to 3.5% this year, well above 1.9% expected in March.  Meanwhile, the economy is seen expanding 1.7% this year, below 2.8% estimated in March and the growth outlook was also lowered for both 2023 and 2024. PCE inflation is seen higher at 5.2% in 2022 while the outlook was revised lower for both 2023 and 2024. 
  • Retail sales in the US unexpectedly fell 0.3% mom in May, the first decline so far this year and compared to market forecasts of a 0.2% rise. 
  • In an emergency meeting of the ECB held yesterday, the Bank announced it shall accelerate work on a new tool to prevent unwarranted jumps in euro-area bond yields. The move aims to avert fragmentation risks in the Eurozone, as the pledge of higher borrowing costs last week triggered a sharp sell-off in government bonds of members with higher debt.