Ongoing Market Commentary: Retail investors in buying mood

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 sharply higher on Thursday after optimistic retail earnings outlooks and waning concerns about overly aggressive interest rate hikes by the Federal Reserve put investors in a buying mood. All three major US stock indices posted solid gains, with economically sensitive consumer discretionary and microchip stocks beating the broader market. European bourses also ended higher, led by gains in retail shares. 

Summary

• Shares in Asia followed the overnight session on Wall Street this morning. The Hang Seng jumped 2.5%, led by tech stocks and the Shanghai Composite extended gains for the third session. Markets in South Korea and Australia climbed around 1%, each. 
• European shares face a muted open as US futures edged lower early morning. 
• Oil prices held on to their recent advance and were on track to close the week higher, buoyed by persistent concerns about tight supply. Meanwhile, a top Hungarian aide said his country needs 3-½ to 4 years to shift away from Russian crude and make huge investments to adjust its economy and that it could not back the EU’s proposed oil embargo until there was a deal on all issues. 
• Australia retail sales climbed to record highs in April as consumers spent big for the holidays. Data from the Australian Bureau of Statistics on Friday showed retail sales rose 0.9% in April to a record, matching analysts’ forecasts. 
• Russian President Vladimir Putin said he’s willing to facilitate grain and fertilizer exports as global concern mounts about food shortages and rising prices – but only if sanctions on his country are lifted. The US and its allies would be highly unlikely to agree to remove the extensive sanctions placed on Russia in response to its move to link it to the growing food crisis. 
• Investors are supposed to receive about $100 million of interest on Russian foreign debt in their accounts by Friday, payments the country says it has already made. That’s unlikely to satiate concerned bondholders who are itching to see the cash after the US Treasury closed a loophole that previously allowed American banks and individuals to accept such payments. 
• Shares of Alibaba soared in Hong Kong this morning as investors welcomed the company’s better-than-expected earnings. Revenues rose by 9% from a year earlier while a wider loss was mainly attributed to price drops in its equity investments in publicly traded companies. The company declined to provide forward guidance in view of Covid-19 restrictions in China.