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 in negative territory for the fourth straight session on Wednesday, with the Dow 280 points lower, the S&P down 0.8% and the Nasdaq with a 0.6% loss. On a monthly basis, both the Dow and the S&P 500 lost over 4% and the Nasdaq more than 4.5% in August, their worst performance in seven years. European equity markets also fell for a fourth consecutive session Wednesday and suffered sharp losses in August after data showed inflation in the Euro Area accelerated more than expected, strengthening the case for the ECB to deliver a big rate hike next week. At the same time, concerns over a further reduction in gas supply increased as natural gas flows via the Nord Stream 1 pipeline were halted for maintenance. On a monthly basis, the Euro Stoxx 50 lost 5.1% in August. 


  • Asian equities slid this morning with losses of well over 1% in both the Nikkei and the Hang Seng. 
  • European shares are poised for heavy losses as hawkish messaging from central banks and another Covid-19 lockdown of a major Chinese city sapped global investors’ risk appetite. US equity futures are also seen extending their fall. 
  • Oil prices traded modestly weaker this morning after closing out the third consecutive monthly decline, as recession worries and a weakening demand outlook overshadowed concerns about tighter supply. Prices have fallen about 20% in the past three months. 
  • The Caixin China General Manufacturing PMI unexpectedly fell to 49.5 in August from 50.4 in July, missing market estimates of 50.2. This was the first drop in the sector since May, amid widespread Covid-19 infections and fresh curbs in several cities. 
  • The annual inflation rate in the Euro Area accelerated to 9.1% in August from 8.9% in July, above market forecasts of 9%, preliminary estimates showed. The inflation broke a new record high rate, as energy cost remains elevated and prices of food and services continue to accelerate. Excluding energy, inflation increased to 5.8%. 
  • Some of Wall Street’s biggest banks boosted their forecasts for ECB interest rates, saying faster-than-expected inflation will convince officials to react with even more aggression. Economists at Goldman Sachs, Bank of America and JPMorgan now predict a 75 basis-point increase at next week’s meeting, which hawkish Governing Council members had floated as an option in recent days.  
  • Private businesses in the US hired 132k workers in August, the least since early 2021, suggesting the labour market may be cooling. Figures also showed annual pay growth stabilised at 7.6%. 
  • Cleveland Fed President Loretta Mester said on Wednesday that the fed funds rate will have to be moved “somewhat above 4%” by early next year and stay there in order to bring high inflation substantially lower, and that she does not anticipate rate cuts in 2023. 
  • Group of Seven finance ministers will hold talks this Friday on allowing global purchases of Russian oil at a capped price – a gambit that the US hopes will ease energy market pressures and slash overall Russian revenues from crude. The plan would allow buyers of Russian oil under a capped price to continue getting crucial services like financing and insurance for tankers. 
  • Liz Truss ruled out introducing any new taxes or rationing of energy this winter if she becomes UK’s next premier, two eye-catching pledges in her final pitch for the post. Truss made the commitments at the last Conservative Party leadership hustings in London, ahead of the victor being announced on the 5th September. She plans an emergency mini-budget within her first month in office but is yet to detail an extensive plan for how she would ease the cost-of-living pain.   
  • Snap announced Wednesday that Q3 revenue growth is running at the slowest rate in its history, as high inflation, rising interest rates and a deteriorating economy continue to ravage the advertising industry. As a result, the company will cut 20% of all staff, restructure its advertising sales unit and shut down projects including mobile games and novelties, in order to focus in improving sales and the number of Snapchat users. 
  • The Italian government announced yesterday that it would hold exclusive talks with Delta Air Lines and Air France-KLM to privatise ITA Airways, as Prime Minister Mario Draghi pushed for a deal before the end of his mandate ahead of elections in September.