Global Markets News Round-up: 27/02/23

Goldman Sachs is set to hold its second-ever investor day, hoping to convince investors of the value of its $2.5tn asset and wealth management business. This comes after the bank announced a $6bn loss in its consumer banking division. 

Saudi Foreign Minister Prince Faisal bin Farhan visited Ukraine over the weekend as the US warned China against arming Russia in the Ukraine conflict. 

Meanwhile, the oil industry’s biggest annual event is returning to London for the first time since the pandemic began. At International Energy Week, traders will discuss whether China’s economic recovery can boost demand and whether sanctions on Russia will reduce supply. 

Brexit negotiations continue between UK Chancellor Rishi Sunak and European Commission President Ursula von der Leyen, with a deal expected to be announced today. The deal is likely to ease the trade barriers that emerged following the Northern Ireland Protocol.

The European Central Bank (ECB) is expected to hike rates by 50 bps in March, according to ECB Chief Christine Lagarde. The central bank aims to reduce inflation to 2% and keep it sustainable.

In other news, mistrust of Chinese President Xi Jinping is endangering one of Wall Street’s favourite trades, with Millennium hiring veteran metal traders for commodity expansion. 

Airbus predicts Australia and Pacific nations will buy 920 jets in the next 20 years, while Adani is seeking to win back debt investors’ faith. 

Twitter is cutting engineering and product jobs to curb costs, while UK firms plan to hire more staff and increase prices despite recession. 

Foreign exchange traders are jumping on the renewal of the widening rates spread, with the dollar-yen rate building momentum for an extended run higher on the back of rising two-year Treasury yields.

Chinese investment bank China Renaissance’s chairman, Bao Fan, is assisting the authorities in a probe after he disappeared earlier this month. The company has pledged to cooperate with any potential requests.

Private equity firms are struggling to find bargains in the market despite having a record $3.7 trillion in unspent cash at the end of 2022, according to Bain’s private equity chair, Hugh MacArthur. The competition for deals is likely to remain high, and prices are expected to remain elevated.

The biggest semiconductor-producing nations recently met to discuss maintaining a steady supply of semiconductors. 

An accidental lab leak was reported as the most likely origin of Covid-19, a classified US Energy Department report concluded this with “low confidence.” The FBI had previously come to a similar conclusion in 2021 with “moderate confidence.” 

Berkshire Hathaway’s operating earnings fell by 14%, but Warren Buffett remains optimistic about the US economy. The company sold 11 tons of peanut brittle and chocolates to investors at last year’s annual meeting, earning over $400,000 in two days.

Markets since Friday:

Asia equities saw losses on Monday following heavy selling on Wall Street last week as investors adjusted their forecasts for US interest rates in response to high inflation data. 

Shares in Australia, South Korea, and China weighed on a gauge of the region’s stocks, while Hong Kong’s Hang Seng Index approached levels that would wipe out its 2023 gains. Japanese stocks fluctuated, and US futures eased from their earlier highs to be up marginally after Friday’s slump of more than 1% for the S&P 500 and Nasdaq 100, which each suffered their worst week since December. Meanwhile, European equity futures inched up.

Investor jitters over riskier assets follow an unexpected acceleration in the personal consumption expenditures price index, the Federal Reserve’s favored inflation gauge, in January. 

The PCE data release on Friday prompted a swift repricing of interest rate forecasts, with traders now pricing US rates to peak at 5.4% this year, compared to expectations held just a month ago of rates to peak at less than 5%. 

The yen strengthened against the dollar after a sharp fall on Friday, and the Bank of Japan Governor nominee Kazuo Ueda spoke again in the Japanese parliament without any large reverberation in markets. 

Inflation data released last week showed prices in the nation were rising at the fastest pace in four decades, placing pressure on the central bank to reassess its loose policy settings.

Yield on the 10-year Treasury was little changed in Asia on Monday after a jump of seven basis points on Friday. Elevated yields continued to support the dollar, with a gauge of the greenback flat after rising 0.7% on Friday. The Australian 10-year yield rose six points, while the New Zealand 10-year yield climbed three basis points and was near the highest level since November.

Oil steadied as concerns that the Fed will keep on raising interest rates to combat inflation balanced out a supply disruption in Europe and optimism over a demand recovery in China. Gold was also steady. Iron ore sank following an order by Chinese authorities to cut production in its major steelmaking hub in a bid to curb pollution.

Eurozone economic and consumer confidence data are due later in the day, along with durable goods data from the US, which will provide extra context for the global economic outlook. 

Mehvish Ayub, senior investment strategist for State Street Global Advisors, said in an interview with Bloomberg Television, “The Fed is data dependent, and the markets are very Fed dependent… The Fed is still very much focused on inflation at the expense of growth. We could see a much higher rate path, looking at 5.5% or 6%.”

Global indices at 6:30am UKT:

Dow Jones: 32,816.92 (-1.02%)

NASDAQ: 11,394.94 (-1.69%)

FTSE100: 7,878.66 (-0.37%)

CAC40: 7,187.27 (-1.78%)

Sensex: 59,122.04 (-0.57%)

Nifty50: 17,353.90 (-0.64%)

Nikkei225: 27,447.25 (-0.02%)

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