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 declined, trimming a strong start to 2023, as investors prepared for a busy week full of earnings data, economic reports, and monetary policy decisions. The Fed is expected to raise rates by a decelerated 25-bp rate hike later this week, and the European Central Bank and Bank of England are anticipated to increase their benchmark rates by 50 bps. Equity news was light to begin the week, and the economic calendar was quiet yesterday before heating up.  The Dow Jones Industrial Average decreased 0.8% to 33,717, the S&P 500 Index cell 1.3% to 4,018, and the Nasdaq Composite tumbled 2.0% to 11,394.  Meantime, European equities ended mixed as the markets digested some lacklustre economic data in the region. 

Summary as at 31.01.2023 

  • Asian equity markets mostly declined on Tuesday as caution dominated sentiment ahead of key policy decisions from major central banks this week. Investors also digested a raft of mostly positive regional data, with Chinese manufacturing and services activity beating expectations and returning to growth in January as the country ended its zero-Covid policy. Shares in mainland China, Hong Kong and South Korea fell, while Australian stocks gained. Meanwhile, Japanese shares fluctuated around breakeven. 
  • European equities are tipped to nudge lower similar to their US counterparts with investors forced on crucial central bank decisions this week. 
  • Oil prices fell on Tuesday after losing about 4% in the past two sessions, as optimism over better-than-expected economic data from China was offset by caution over an upcoming Federal Reserve meeting and an OPEC decision on production. 
  • The International Monetary Fund this morning raised its 2023 global growth outlook slightly due to surprisingly resilient demand in the United States and Europe, an easing of energy costs and the reopening of China’s economy after the lifting of pandemic curbs. The IMF said global growth would still drop to 2.9% in 2023 from 3.4% in 2022, but its latest World Economic Outlook forecasts mark an improvement over an October prediction of 2.7% this year with warnings that the world could easily tip into recession. Meanwhile, global inflation is set to fall from 8.8% in 2022 to 6.6% this year and 4.3% in 2024. 
  • Chinese business activity grew past expectations in January, as the recent relaxation of anti-Covid measures and the Lunar New year holiday both helped break a three-month slump.  China’s manufacturing PMI grew by 50.1 in January, higher than expectations of 49.8 and December’s reading of 47.0.  The services sector also rebounded sharply from a three-month decline, with the non-manufacturing PMI advancing to a six-month high of 54.4, higher than expectations of 52.0 and well above December’s reading of 41.6. 
  • Retail sales in Australia declined by 3.9% mom in December, reversing from an upwardly revised 1.7% growth in the previous month and worse than market forecasts of a 0.3% fall. This was the first drop in retail trade for 2022 following eleven consecutive monthly rises, amid high cost-of-living pressures.  
  • Abu Dhabi’s International Holding Co. will invest about $400 million in Adani Enterprises Ltd.’s follow-on share sale, voicing confidence in Indian billionaire Gautam Adani’s business empire after almost $70 billion was wiped off its market value. The funding from IHC, which is controlled by a key member of the emirate’s royal family, will represent about 16% of the offering and follows an almost $2 billion investment in Adani’s companies last year.   
  • Samsung Electronics Co Ltd reported this morning a 69% plunge in Q4 profit, as consumer demand for electronic devices dropped and clients tightened their belts on a weak economy, dragging down chip prices.  The company said its operating profit fell to 4.3 trillion won, its lowest quarterly profit in eight years, from 13.87 trillion won a year earlier.  
  • UBS reported this morning a 23% increase in Q4 profit, beating analyst estimates, helped by a fall in costs despite a drop in financial markets.  The Bank reported a net profit figure of $1.7 billion, versus the $ 1.3 billion average expected by analysts.  It also announced a 10% increase in dividends to $0.55 per share. 
  • Earlier today, UniCredit said net profit came in at €2.46 billion in the three months through December, more than twice an average analysts forecast of €1.10 billion.  The Bank pledged to return €5.25 billion to investors based on its 2022 results, further hiking one of the most ambitious payout targets among European banks.  
  • Multiple media sources reported on Monday that Alibaba Group Holding will be moving its headquarters from China to Singapore.  However, the company termed the speculation “untrue” saying that the Singapore campus will be used for regional operations with partners in Southeast Asia.