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 three major US equity indices closed flat to higher in a choppy Wednesday session, with the Dow up 73 points, while both the Nasdaq and the S&P 500 ended roughly flat, amid a recovery in tech stocks and consumer staples. Several Fed policymakers, including Chair Jerome Powell, made a case for faster interest rate hikes to rein in sky-high inflation, with markets now pricing a 75-basis-point hike in July. Elsewhere, major European bourses closed the mid-week session in negative territory, ending a three-day winning streak as renewed recession fears dented risk sentiment. 


  • Asian shares were ending a rough quarter in a sombre mood on Thursday with the exception of Chinese markets which rose this morning after government data showed signs of gradual improvement in the economy. 
  • Early Thursday, European and US equity futures were both down with little sign as yet that the new quarter will bring in brave bargain hunters. 
  • Oil prices edged higher this morning after dipping in early Asian trade, as concerns about global supply tightness outweighed a build in US gasoline and distillate inventories. 
  • The Official NBS Manufacturing PMI for China rose to 50.2 in June from 49.6 in May and compared with market consensus of 50.5. This was the first growth in factory activity since February and the steepest pace in 6 months. In the meantime, the indicator for the services sector also surged in June to 54.7 from 47.8 in May, as Covid-19 cases in several cities dropped and restrictions eased further. 
  • Russia’s economy shrank by 4.3% in May year-on-year after falling by a revised 2.8% in April, the economy ministry said on Thursday. In January through May, the economic growth was 0.5% in year-on-year terms. 
  • Germany’s inflation figures published yesterday came in at a lower-than-expected 7.6% in June, slowing form all-time high of 7.9% in May. These contrasted with inflation in Spain, which beat forecasts at 10.2%, a level not seen since 1985. Meanwhile, business and consumer confidence indicators for the Euro Area were mixed, with consumers and retailers becoming more pessimistic while sentiment among service providers and manufacturers unexpectedly improved. 
  • Federal Reserve Chair Jerome Powell reiterated Fed’s commitment to do whatever it takes to control high inflation and said the bigger risk is to fail to restore price stability. Powell also noted during the ECB’s annual conference that the US economy is in a good shape and well positioned to withstand tighter monetary policy and that he hopes growth will remain positive, although there is a risk it will slow more than needed. He also confirmed the Fed is raising rates expeditiously and aims to move into restrictive territory fairly quickly. 
  • At a summit in Madrid, NATO leaders agreed to put more than 300,000 troops on high alert while beefing up its European defences with extra forces, enhanced air power and new equipment. The alliance is set to add two new members: Sweden and Finland. NATO also identified China’s increasing military presence as a “challenge” for the first time. 
  • On the earnings front, Bed Bath & Beyond missed Wall Street expectations yesterday and announced the resignation of its CEO, ending the day with a 23.6% slump.