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 ended a dismal ear on a sour note with the Dow closing 0.2% lower, while the S&P 500 and Nasdaq fell 0.3% and 0.1%, respectively, as investors continued to assess the outlook for growth and tighter monetary policy worldwide.  the Dow fell 8.8% in 2022, while the S&P 500 and Nasdaq 100 plunged 19.5% and 33.3%, respectively, marking Wall Street’s worst annual performance since 2008.  In December, the Dow lost 4.2%, the S&P 500 retreated by 5.9%, and the Nasdaq 100 dropped 9%.  European equity markets also closed lower in the last trading session of 2002, with the benchmark Euro Stoxx 50 suffering a 12.4% yearly loss, the biggest since 2018. 

Summary as at 02.01.2023 

  • Asian equity markets were mixed in holiday-thinned trade on Monday, with most major bourses in the region remaining shut for New Year’s Day.  South Korean equities edged lower and Indian shares gained, while other major markets including Australia, Japan, mainland China, and Hong Kong remain closed for the holidays. 
  • The first trading week of the year will see financial markets closed on Monday of the New Year’s Day holiday. 
  • Croatia adopted the euro as its currency yesterday, becoming the 20th member state of the eurozone.  This was the first expansion of the monetary union since Lithuania jointed in 2015. 
  • Kristalina Georgieva, the Managing Director of the International Monetary Fund said on Sunday that for much of the global economy, 2023 is going to be a tough year as the main engines of global growth – the United States, Europe and China – all experience weakening activity. 
  • Luiz Inácio Lula da Silva, took the reins of the Brazilian government yesterday in an elaborate inauguration, complete with a motorcade, a music festival and hundreds of thousands of supporters filling the central esplanade of Brasília, the capital. It caps a stunning political comeback for the man who was once Brazil’s most popular president. 
  • It will be a busy week in the US with centre stage taken by labour market report, FOMC meeting minutes, ISM manufacturing and services PMI, and factory orders.  Elsewhere, inflation rates for December will be released across the Euro Area. Finally, investors will pay attention to manufacturing PMIs from China, India, Spain, South Korea, Canada, Italy, and Switzerland.