Weekly round up
UK markets continued their downtrend this week with the FTSE 100 Index hitting over a 10-week low of 7,043 on Friday, falling by 4.93% since Monday.
The intensifying conflict in Ukraine was the main reason for the fall with Russian forces having attacked Europe’s largest power plant overnight igniting a fire and triggering fears of an environmental disaster at the same time as a humanitarian crisis.
Prime Minister Boris Johnson told Ukrainian President Volodymyr Zelenskyy on Friday he would seek an emergency UN Security Council meeting on the matter. The Ukraine war and soaring inflation is now set to halve the UK’s economic growth this year, with The British Chamber of Commerce downgrading its expectations for UK GDP growth in 2022, from 4.2% in its previous forecast in December to 3.6%. This is less than half the growth of 7.5% recorded last year, reflecting the poor outlook for consumer spending, and a weaker than expected rebound in business investment. Weakening consumer confidence is expected to limit households’ willingness to support spending by running down savings built-up during the Covid pandemic.
In the commodity markets, Brent crude traded above $112 per barrel on Friday lifted by the attack on a nuclear power plant in Ukraine.
Crude markets have experienced extreme volatility since Russia’s invasion of Ukraine, as a rapidly deteriorating situation and sweeping sanctions stoked fears of further supply disruptions. The US took aim on Wednesday at Russia’s oil refining sector with new export curbs, but has so far stopped short of targeting Russia’s oil and gas exports amid concerns over energy prices. Gold traded above $1,940 an ounce on Friday and is set for a weekly gain, as investors remained nervous over the Russia-Ukraine conflict. The economic ramifications of the war in Ukraine are lifting gold’s haven appeal with the World Bank president saying that it will cut global economic growth at a time inflation was already rising.
US equity futures were down over 0.6% on Friday morning as fights intensified in Ukraine and investors awaited the US jobs report.
The February jobs report is expected to show the US economy added 400,000 jobs bringing again the case for more aggressive rate hikes. Leisure, hospitality and retail sectors which were hardest hit by Omicron in January are likely to show the biggest gains. That would leave employment 2.5 million jobs below its pre-pandemic level and many economists believe the job market could recover all the pandemic losses this year.
Meanwhile, the unemployment rate is seen edging lower to 3.9% while annual wage growth likely accelerated further. This is the latest jobs report before the Federal Reserve’s next meeting where it is expected to begin hiking rates, with Fed chair, Jerome Powell leaning toward a smaller 25 basis point increase in March, while leaving the door open for moving more aggressively down the line should inflation persist.
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