Bassanese Bites: Breaking point – May 02 2022

Global Markets

Mixed earnings reports, hot U.S. wage and price inflation, and the prospect of an aggressive U.S. Fed rate hike conspired to send global equities lower again last week. Of course, we can add to this worrying mix, renewed concerns over China’s economy due its harsh lockdowns and the raging war in Ukraine. While the U.S. earnings reporting season is overall still reasonable, what we are seeing is an unwinding of some of the COVID-related surge in profits and share prices by America’s glamorous tech stocks (such as Amazon and Netflix) which is only aggravating the downward pressure on this key growth sector caused by higher U.S. interest rates.

Despite ongoing aggressive interest rate hike expectations, gathering equity market weakness has seen longer-term bond yields stabilise somewhat in recent weeks, while oil prices have also pulled back. The $U.S. dollar, meanwhile, remains all conquering.

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