· Ukraine-Russia tensions escalate as Ukrainian President Volodymyr Zelensky says a large-scale Russian offensive is under way in the eastern Donbas region
· The World Bank estimate for global growth in 2022 has been trimmed to 3.2% from a January prediction of 4.1%
· Growing concerns over Chinese lockdowns and slowing global growth means Hong Kong stocks fell steeply. S&P500 and The Nasdaq showing muted reactions so far
· The priority for this week is US earnings, as analysts wait to see how big-cap tech is faring in the high inflationary environment
· Crude oil stands at over $107, up from under $100 last week
Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown:
“There is a cocktail of headwinds facing markets this week. Ukraine-Russia tensions have escalated once more, with a Russian offensive underway in the crucial Donbas region. Any suggestion that tensions are going to be prolonged, or more violent, is enough to mute sentiment in western markets. This is partly why the FTSE100 has opened flat this morning. Mounting tensions have resulted in Crude Oil prices remaining elevated though, with prices topping $107, up substantially from just a week ago. While continued volatility in the oil price is to be expected for some time, the speed of recent increases has been surprising.
However, there are further issues to contend with, including concerns over global growth. The World Bank estimate for global growth in 2022 has been trimmed to 3.2% from a January prediction of 4.1%, owing to a combination of the ongoing Ukraine crisis, COVID-19 and supply chain disruption. There are growing concerns of recessions. Rising interest rates at a time when economic activity is slowing down makes for very difficult conditions, which aren’t lost on the financial world. Looking to the here-and-now, the US reaction has so far been muted, although this of course follows two weeks in the red for European and US stock markets. Asian markets have also suffered, with Hong Kong equities facing the brunt of supply chain disruption, following China’s zero Covid approach.
Looking to the US, the biggest catalyst for big moves this week is the beginning of earnings season. First up is Netflix, which should give some indication of how global discretionary spending is faring in a high-inflationary environment. The group’s strong brand and established market share dominance should hold it in better stead than newer incumbents, but this is far from guaranteed and the market reaction is likely to be severe if it fails to reach its lowered subscriber targets.”