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. 

The Dow lost over 500 points in a volatile session on Wednesday, and the S&P 500 and Nasdaq tumbled roughly 1.8% each as investors digested the Federal Reserve’s rate decision and Powell’s gloomy outlook for the economy. Elsewhere, European equity markets found some footing to close higher on Wednesday, after being flat for most of the session. The Euro Stoxx 50 climbed 0.7%, led by gains in energy shares. 


  • Asian equity markets extended losses on Thursday after the Fed’s rate hike diminished the odds of a soft economic landing.  The Taiwanese, Indonesian and Philippine central banks are also set to raise interest rates today, keeping markets on edge.  Meanwhile, the Bank of Japan maintained its ultra-loose policy and remained dovish in its outlook despite pressure from rising global interest rates and a weakening yen.  Equity indices in Japan, China, Hong Kong, and South Korea all traded in negative territory.  Australian markets were closed for a holiday. 
  • European equity futures are pointing to a week start as US futures also extended their decline. 
  • Oil rebounded today after sliding 1% in the previous session as concerns over further tightening by the Fed stoked concerns about the global economic outlook and energy demand.  Official data also showed that US crude inventories rose by 1.1mn barrels last week, while US demand for fuel over the past four weeks fell to 8.5mn barrels per day, the lowest since February. 
  • The Federal Reserve raised the target range for the fed funds rate by another 75bps to 3%-3.25% yesterday, the fifth consecutive rate hike, and pushing borrowing costs to the highest since 2008.  The central bank also signalled larger increases to come in new projections showing its policy rate reaching 4.4% by the end of 2022 before topping out at 4.6% in 2023.  Officials also significantly cut their outlook for 2022 economic growth, expecting just a 0.2% gain in GDP, down from 1.7% in June. 
  • The Bank of England is today set to lift its benchmark lending rate a half percentage point to 2.25% and confirm plans to sell more of the £895 billion of bonds acquired during the quantitative-easing program.   
  • The US and its allies got a new chance to cast Vladimir Putin as a pariah isolated on the global stage with this week’s gathering of world leaders in New York, even as the United Nations has failed to stop or even curb Russia’s war in Ukraine.  In speech after speech, leaders appearing before the General Assembly condemned Russia’s invasion of its neighbour.