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. 

European equity markets kicked off the week on a sour note, with the Euro Stoxx 50 down 1.5%, as a gains in energy companies offset some of the losses across all other sectors. On the economic front, fresh PMIs for major economies pointed to further weakness in private sector activity in August while retail sales in the Eurozone slowed more than expected. The US equity markets remained closed yesterday for the Labour Day holiday. 


  • Shares in Asia were once again trading mixed on Tuesday with the Nikkei 225 recovering from earlier losses to rise fractionally while the Hang Seng gave up early gains to fall by around 0.4%. Mainland China’s Shanghai Composite added around 1% while the Kospi and the ASX 200 were little changed. 
  • European markets are seen heading for a slightly higher open helped by a rise in US equity futures. 
  • Oil prices were lower on Tuesday after gaining more than 2% yesterday, as traders weighed the impact of a modest output cut by OPEC+ and the potential for further action from the group. OPEC and its allies, including Russia, agreed to reduce output by 100,000 barrels a day from October, amounting to roughly 0.1% of global demand, to deal with macroeconomic headwinds and counter a potential supply boost from Iran. 
  • The Reserve Bank of Australia raised the cash rate by 50bps to 2.35% earlier today. Policymakers reiterated that they expect to increase interest rates further over the months ahead, but it is not on a pre-set path as the size and timing will be guided by the incoming data. 
  • Top policymakers in China said on Monday that they will accelerate the roll-out of pro-growth measures in Q3 as they attempt to stave off a further loss of economic momentum. China’s central bank also said it will cut the foreign exchange reserve requirement for financial institutions in a move seen as aimed at supporting the yuan, as rapidly falling currency could drive further capital outflows. 
  • Liz Truss won the Conservative Party elections and is set to replace Boris Johnson as the UK prime minister. Meanwhile, she has drafted plans to fix annual electricity and gas bills for a typical household at or below the current level of £1,971. The policy could cost as much as £130 billion over the next 18 months and will help avert a massive increase in energy bills due to kick in at the start of October. 
  • Russia may face a longer and deeper recession as the impact of US and European sanctions spreads, handicapping sectors that the country has relied on for years to power its economy, according to an internal report. The document paints a far more dire picture than officials usually do in upbeat public pronouncements. 
  • Gazprom’s Deputy CEO Vitaly Markelov said earlier today that Russian gas pipeline Nord Stream 1 will not resume gas supplies until Siemens Energy repairs faulty equipment. 
  • Volkswagen decided to push ahead with its plan to list a minority stake in Porsche this year despite gyrating markets, paving the way for what could be one of Europe’s biggest IPOs. The carmaker is planning the listing at the end of September or beginning of October.