Global Markets Update – Monday 21 February 2022

Global Stocks

Global stocks fell while bonds rallied as tensions between Russia and the west over Ukraine further ramped up. While Russia stated that some of its troops were returning to base, NATO said it failed to see any evidence of such a move and that further Russian troops had been sent to the Ukraine border. US President Joe Biden said there was a “very high risk” of a Russian invasion, adding he believed that Moscow was engaged in “a false flag operation to have an excuse to go in”.


The FTSE 100 declined 1.9% over the week.

UK inflation rose at an annual rate of 5.5% in January, up from 5.4% in December and the highest level in 30 years.

UK retail sales grew 1.9% over the month of January, marking the largest monthly increase since the reopening of non-essential shops last April.

The Bank of England indicated it would begin the process of gradually reducing the £895 billion stock of debt it has bought as part of its QE measures by ceasing reinvestments of government bonds it holds as they mature, as well as offloading £20bn of corporate debt. Additionally, when interest rates rise from the current level of 0.5% to 1.0% the BoE will also consider actively selling gilts.


The S&P 500 lost 0.8% over the week while the tech-heavy Nasdaq dropped 1.9%.

Minutes of the latest FOMC meeting highlighted the Fed’s determination to combat stubbornly high inflation, although some officials warned about the risks of damaging markets and the wider economy by tightening policy too quickly.


The FTSEurofirst 300 slid 0.8% over the week.

In a marked change from comments just three weeks ago, Philip Lane, chief economist of the European Central Bank, said eurozone inflation looks unlikely to drop below its 2% target in the next two years. He said the change in inflation expectations was not “staggeringly huge” so any change in policy would still be gradual, and drew a distinction between a likely “normalisation of policy” (ending asset purchases and raising its deposit rate to zero) and a more drastic “monetary tightening” saying “That is not what we see in front of us”.


The Nikkei 225 fell 2.1% over the week.

Japan’s GDP grew an annualised 5.4% in the fourth quarter of 2021, helped by a rebound in consumer spending and an easing in semiconductor shortages which allowed automobile companies to boost output. On a quarter-on-quarter basis, the Japanese economy grew 1.3% after a fall of 0.7% in the third quarter.

Pacific Basin

China’s National Development and Reform Commission, the country’s top state planning agency, urged online food delivery platforms to lower the fees they charge restaurants. The news hit shares in food platform Meituan as well as Alibaba, which owns food delivery platform


The yield on the 10-year US Treasury bond closed the week at 1.93%, a drop of 12 bps over the week and back below the 2.0% level it breached for the first time since August 2019 during the previous week. Parts of the US yield curve have begun to invert, with seven-year yields trading above 10-year yields. A more complete inversion of the curve, such as 10-year yields falling below short-term interest rates, has in the past been a reliable predictor of recession.

The yield on the 10-year German Bund closed the week 10 bps lower at 0.19%, while the 10-year UK Gilt dropped 17 bps to end at 1.3%. As well as eurozone sovereign debt, European high-yield bonds have lost ground so far this year, losing 3.3 per cent since the start of 2022 and putting them on track for the worst two-month run since the market ructions at the start of the pandemic in March 2020.

Despite signs that inflation may be peaking in Brazil, Mexico and South Africa, the spread on emerging market bonds over US high yield debt is the widest since at least 2014.


Gold neared $1,900 per troy ounce, its highest level since mid-2021 as investors fled to assets perceived to be safe havens. The precious metal has outperformed both bonds and equities since the start of 2022.

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Image by Gerd Altmann from Pixabay