Ongoing Market Commentary: Holidaying returns to pre-pandemic levels

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 globalisation and further fuel higher structural inflation. 

Equities closed out their worst month in years on Friday, as investors battled a host of headwinds, including monetary tightening from the Fed, rising interest rates, worsening inflation, Covid lockdowns in China and the ongoing war in Ukraine. The Nasdaq fell 13.3% in April, its worst monthly performance since the financial crisis in October 2008, the S&P 500 sank 8.8% for its biggest monthly drop since the onset of the pandemic in March 2020, and the Dow was down 3.9%. The Nasdaq has dropped deeply into bear territory, now 24% off its high, with tech stocks enduring the worst of the April selloff.  

Summary

• Shares in Asia were lower in Monday morning trade, with data released over the weekend showing Chinese factory activity contracted at a steep pace in April as Covid lockdowns hit industrial production. Markets in Hong Kong, mainland China, Singapore and Taiwan are closed today for a holiday. 
• European stocks are expected to follow Asian shares lower while in the US futures were seen little changed this morning. 
• Oil prices fell on Monday as concerns about slowing economic growth in China outweighed fears of potential supply disruptions from a looming European Union ban on Russian crude. 
• US House Speaker Nancy Pelosi met Ukraine’s president on Saturday in an unannounced visit to Kyiv, telling him that “your fight is a fight for everyone.” Pelosi, second in line to the US presidency, became the highest-ranked American official to travel to the country since Russia’s invasion. 
• German Foreign Minister Annalena Baerbock made it clear that sanctions against Russia will only be lifted after a complete withdrawal of its troops from Ukrainian territory, including the Donbas region and Crimea. 
• Germany could end its dependence on Russian oil by the end of the summer, according to the Economy Ministry’s latest energy security report published Sunday. The government has already agreed to an EU embargo on Russian coal and plans to be independent of Russian gas by the middle of 2024. Meanwhile, Hungary announced that it would veto any European proposal that leads to the restrictions of energy imports from Russia. 
• As war broke out in Europe and US inflation soared, Berkshire Hathaway’s Warren Buffett went on his biggest stock buying spree for at least a decade, undeterred by the geopolitical turmoil and fears of runaway inflation. The billionaire investor and his deputies expanded the conglomerate’s stakes in Chevron and Activision Blizzard even as Buffett noted the “extraordinary” price increases in Berkshire’s businesses. 
• TUI, the world’s largest holiday company, recorded 1.3 million bookings in the past four weeks, as the number of holidaymakers rose toward pre-pandemic levels.  
• The week ahead features more tech-heavyweights reporting their earnings and a good dose of energy companies. On the macroeconomic front, the two-day meeting of the Federal Open Market Committee will be in the spotlight. The economic calendar includes updates on durable goods orders and the US jobs report, where analysts expect a gain of 390k in payrolls for April.