Ongoing Market Commentary: British economy expands by 8.7%

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 stock market remained volatile on Thursday amid lingering worries over the implications of an aggressive tightening on the growth momentum. The Dow closed 104 points down, the S&P 500 fell 0.1% while the Nasdaq was marginally up. Meanwhile, European bourses came under renewed selling pressure yesterday but managed to recover from deeper losses, as investors grew worried that a tightening monetary policy to curb record inflation could tip the eurozone into recession. 

Summary

• Shares in Asia rose this morning with the Nikkei 225 leading the pack as shares of Japanese conglomerate SoftBank Group jumped more than 9% despite reporting Thursday a record loss at its Vision Fund investment unit.  
• European shares are set to follow their Asian peers higher while US futures are also pointing to a positive start later in the day. 
• Oil prices rose over 1% on Friday, up for the third straight session, amid concerns about dwindling fuel supply from Russia. However, the commodity is set to end the week lower, on weaker global growth, surging inflation and prolonged China’s Covid-19 curbs. 
• Federal Reserve Chair Jerome Powell reaffirmed that the central bank is likely to raise interest rates by a half percentage point at each of its next two meetings, in June and July. The Fed is determined to get inflation under control, but its ability to do that without triggering a recession may depend on factors outside its control, Powell said in an interview. 
• Producer prices in the US increased 0.5% mom in April, less than an upwardly revised 1.6% rise in March and mostly in line with market expectations. Year on year, wholesale prices rose 11%, above market expectations of a 10.7% gain and compared to 11.5% in March. 
• The British economy expanded 8.7% yoy in the first quarter of 2022, above 6.6% in Q4 but slightly below forecasts of 9%, preliminary estimates showed. However, a slowdown is expected in the coming months due to the impact of the war in Ukraine and as rising inflation hurts consumers’ purchasing power. 
• Some EU nations are saying it may be time to consider delaying a push to ban Russian oil so they can proceed with the rest of a proposed sanctions package if the bloc can’t persuade Hungary to back the embargo. Russia’s oil revenues are up 50% this year despite various trade restrictions in place following the invasion of Ukraine, data from the International Energy Agency show. 
• Deutsche Telekom reported quarterly core profit and revenue above market estimates on Friday, boosted by its US unit, T-Mobile, along with growth in its European business, and lifted its full-year outlook. 
• Volkswagen expects its electric vehicle business to be as profitable as its fossil fuel-burning cars sooner than the planned two to three years. The company intends to overtake Tesla and become the world’s number one electric carmaker by 2025, building on its bigger product offering covering luxury and premium cars and volume brands.