Weekly Market Wrap 11/03/2022

Sanctions imposed on Russia intensified this week as a group of countries including the G7 and the EU plan to revoke Russia’s status as “most favoured nation” as the invasion of Ukraine shows no sign of ending. This move would allow for even harsher economic sanctions to be imposed on Russia. Brent crude hit multiyear highs as the outlook for energy supply is still tainted by the ongoing conflict. US inflation is growing at the fastest rate in 40 years, with prices led higher by energy and food prices whilst the UK economy rebounded from Omicron at a faster pace than expected. The ECB shifted to a more hawkish stance as it announced plans to stop net bond purchases in Q3 of 2022, due to ongoing inflationary pressure. A number of major global brands, including Coca-Cola, Pepsi and  McDonald’s have ceased operating in Russia as companies look to oppose the Russian invasion of Ukraine. In retaliation Russia plans to seize the assets of companies that exit the Russian market and “transfer these enterprises to those who actually want to work”.

US Market 

The S&P 500 fell 1.60% to 4,259 this week whilst the Dow fell 0.52%. US inflation data showed prices rising at the fastest pace seen since 1982, with an increase of 7.9% from February last year. However, this data does not take into account the full impact seen from the Ukraine crisis as commodity prices continued to rise at the beginning of March. The Federal Reserve meets next Wednesday and is widely expected to deliver an initial 0.25% rate hike in an attempt to combat rising inflation however 0.50% hikes remaining firmly on the table in future Fed meetings.

 UK Market 

The FTSE 100 ended the week up 2.85% at 7,185. Data released on Friday showed that the UK economy grew by 0.8% in January, well ahead of the consensus estimate of 0.2%, rebounding particularly strongly from the affects of the Omicron variant, causing a rally in cyclical stocks on Friday morning. However, the outlook for the UK economy has been dampened as with the cost-of-living increase continuing to erode consumer incomes. The Bank of England is widely expected to deliver a 0.25% rate hike next Thursday, which would take the current base rate to 0.75%.

 European Markets                                                                    

The Euro Stoxx 50 ended the week up 2.69%, the Dax gained 5.72% and the CAC 40 was up 4.42%. The European Central Bank surprised investors by announcing that it will stop its asset purchasing program this year, causing expectations that the central bank could raise rates this year. The bank’s forecasts estimated that inflation would exceed the target of 2% in both 2022 and 2023, satisfying the criteria for a rate increase.

 Fixed Income

The US 10-Year Treasury yield has raised 0.32% to 2.04% this week after rapid inflation data reaffirmed expectations that the Federal reserve will increase interest rates by 0.25% next week.

 Commodities

Brent Crude fell 6.15% to $110 this week as investors hoped oil producing countries other than Russia may increase supply in order to combat a shortage. Prices remained at elevated levels however as concerns around supply of Russian oil as well as a US import ban on oil from Russia.

Gold fell 1.14 % this week to $1,971, retreating slightly from recent highs. US 10-Year yields rose as rate hike expectations increased.

The Week Ahead  

Monday – China FDI

Tuesday – UK Unemployment; China Retail Sales

Wednesday – US Retail Sales; Fed Interest Rate Decision

Thursday – BOE Interest Rate Decision; BOE Minutes

Friday – BoJ Interest Rate Decision; Canada Retail Sales

*Price changes as of last week’s close unless stated otherwise.