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. 

US equities closed higher after a volatile session on Thursday, with the Dow Jones adding almost 200 points, and both the S&P 500 and the Nasdaq rising over 0.5%, driven by financial institutions and healthcare companies. Investors digested remarks from Fed chair Jerome Powell and ECB President Christine Lagarde about the need to bring down inflation to its respective target. European equity markets mostly rose yesterday, supported by financials, healthcare, and basic materials. 


  • Asian shares crept higher this morning with the Hang Seng leading the way on gains of around 2.5%.
  • European stocks are set to nudge higher at the open this morning, following in the footsteps of US equity futures overnight. 
  • Oil prices were higher this morning but were still headed for the second straight weekly drop on a weakening demand outlook driven by central banks’ aggressive monetary tightening and top importer China’s Covid-19 curbs. Prices are down roughly 4% so far this week, sliding at one point to near eight-month lows. 
  • The death of Queen Elizabeth II at the age of 96 marked the start of a tumultuous 10 days for the UK that will see the queen buried and a new king proclaimed as the nation mourns its longest-reigning monarch. Charles, the eldest of Elizabeth’s four children, will be formally proclaimed king. At 73, he is the oldest person to accede to the throne in British history. 
  • China’s annual inflation unexpectedly fell to 2.5% yoy in August from July’s 2-year high of 2.7%, weaker than market forecasts of 2.8%. Prices of both food and non-food eased amid strict Covid curbs and adverse weather. Meantime, producer inflation eased to an 18-month low, marking the 20th straight month of slowing factory-gate prices. 
  • The ECB raised interest rates by an unprecedented 75bps yesterday. Policymakers said interest rates should rise further over the next several meetings but any changes will continue to be data-dependent and follow a meeting-by-meeting approach. At the same time, the central bank has significantly revised up their inflation projections to average 8.1% in 2022, 5.5% in 2023, and 2.3% in 2024, while growth was revised lower to 3.1% in 2022, 0.9% in 2023, and 1.9% in 2024. 
  • The UK’s new prime minister Liz Truss announced on Thursday an energy plan to tackle soaring energy costs and help the energy sector, but doubts persist on how the bill would be funded, while the UK is battling soaring inflation, a widening trade deficit, and recession prospects. The new energy plan, which would cost around £150 billion, will freeze energy bills at an average of £2,500 a year for two years starting from 1st October, and there will be an equivalent guarantee for businesses. The plan will also remove a ban on drilling for shale gas.  
  • Rivian shares popped nearly 11% yesterday after they announced plans for a joint venture with Mercedes to build electric commercial vans for both brands in Europe. Production for the vehicles will be done on a shared assembly line to reduce costs and will begin in a few years.