Ongoing Market Commentary: Fed meeting boosts market sentiment

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 closed higher Wednesday, boosted after minutes from the Federal Reserve’s latest monetary policy meeting showed policymakers unanimously felt the US economy was very strong as they grappled with reining in inflation without triggering a recession. The Dow Jones Industrial Average rose 0.6%, the S&P 500 gained 1.0%, and the Nasdaq Composite added 1.5%. European markets also managed to gain some ground yesterday with upbeat economic data once again lifting sentiment. 

Summary

• Shares in Asia struggled for direction this morning with benchmarks in Hong Kong and Sydney declining while Tokyo, Shanghai and Seoul moved higher.   
• European shares are headed for a muted start as US stock futures were shifting between gains and losses. 
• Oil prices rose on Thursday after being broadly flat in the prior session, lifted by a bigger-than-expected drawdown in US crude stocks ahead of the summer driving season. Meantime, hopes grew among traders that a deal on banning Russian oil by the EU could be reached before the council next meeting on May 30^th. 
• Minutes from the last FOMC in May showed most Fed policymakers judged that 50 basis point increases in the target range for the fed funds rate would likely be appropriate at the next couple of meetings. All participants concurred that the US economy was very strong, the labour market was extremely tight, and inflation was very high, with risks of even faster inflation skewed to the upside. 
• Russia is open to easing its blockade of Ukraine’s ports along the Black Sea if sanctions on Moscow are lifted, a Russian official said Wednesday, a move that, if it went ahead, could increase grain exports and help relieve rising food inflation and shortages.  
• Apple has told its suppliers to speed up iPhone development after China’s strict Covid-19 lockdowns hampered schedule for at least one of the new phones, according to media reports. 
• Nvidia shares fell over 6% after-hours yesterday following the company’s reported Q1 earnings results. While both the EPS of $1.36 and revenue of $8.29 billion came in better than the consensus estimates of $1.29 and $8.12 billion, respectively, Q2 revenue guidance missed the expectations.
• Elon Musk is committing more of his wealth to finance his $44 billion deal for Twitter and seeking additional financial backers. Musk no longer plans to rely on a margin loan backed by shares of Tesla, which are down by about a third since Twitter accepted his bid in late April.