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. 

Equities fell sharply Thursday, effectively more than cancelling the previous session’s rally and leaving key indices at their lowest levels of the year so far, as investors found new reasons to worry about the triple threat of inflation, surging interest rates, and recession. The Dow fell 1.5%, the S&P 500 tumbled 2.1% and the Nasdaq Composite sank 2.8%. All S&P sectors declined, with heavy losses seen from mega-cap tech names such as Tesla, Apple, and Nvidia. Similarly, European markets extended this week’s sell-off, with the benchmark Euro Stoxx 50 index closing 1.7% lower, at almost two-year lows. 


  • Asian markets dropped on Friday, with the Nikkei 225 leading the decline with a drop of over 2%. Also meaningfully lower were markets in Australia and Hong Kong, which both decreased by well over 1%, while losses in China and Korea were more contained. 
  • European and US equity futures both fluctuated near the flatline this morning. 
  • Oil prices were headed for their first weekly gain in five weeks in early morning trade, underpinned by a weaker US dollar and the possibility that OPEC+ may agree to cut crude output when it meets mid next week.  
  • The official Manufacturing PMI for China increased to 50.1 in September from 49.4 in the previous month, surpassing the market forecast of 49.6. This was the first expansion in factory activity in three months, amid a series of stimulus packages from the government and an easing of Covid-19 restrictions in some cities. 
  • The British economy unexpectedly expanded 0.2% in the second quarter, better than initial estimates of a 0.1% contraction. There were increases in services and construction output, even as production fell. 
  • St. Louis Fed President James Bullard reminded markets yesterday that the Fed sees no reason to veer from its course of raising interest rates to subdue inflation, apparently even at the cost of more lost economic growth. His hawkish stance was in line with the message from Cleveland Fed chief Loretta Mester, who said that officials are resolute in their quest to increase rates to a level seen as restrictive. 
  • Vladimir Putin plans to declare today that some 40,000 square miles of eastern and southern Ukraine will become part of Russia. Despite his posturing, the regions in question are not fully under Russian control after months of fighting, and Ukrainian forces are closing in on the city of Lyman, a Russian-occupied rail hub, which would leave Russian troops in an increasingly perilous position in east Ukraine. 
  • Nike cautioned on Thursday that gross margins would remain under pressure through the year as the world’s largest sportswear maker joined peers in warning of a blow from ramped up discounts and a rapidly strengthening dollar. Net income fell 20%, or 93 cents per share, in the three months ended 31st August. The company’s shares, already one of the worst performing Dow components for the year, fell 10% in extended trading.  
  • Meta Platforms CEO Mark Zuckerberg outlined sweeping plans to reorganise teams and reduce headcount for the first time ever, calling an end to an era of rapid growth at the social media giant. The further cost cuts and hiring freeze are Meta’s starkest admission that advertising revenue growth is slowing amid mounting competition for users’ attention.