Global Markets Update – Monday 21 March 2022

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Global stocks rallied amid rising speculation that Russia and Ukraine had made progress on a tentative peace plan. China’s plans to boost its flagging domestic economy also lifted sentiment. Global bonds sold off.

The Russia/Ukraine war has so far resulted in more than three million refugees fleeing Ukraine.


The FTSE 100 increased 3.5% over the week.

Chancellor Rishi Sunak hinted that fuel taxes may be cut in the coming week’s Spring Statement as he seeks to help families struggling with the cost of living.

The Bank of England raised interest rates by 25bps to 0.75%, marking the third back-to-back increase since December. The Bank indicated it now expects UK inflation to hit 8% in the second quarter of 2022, about 1% higher than its February forecasts, with the rate potentially climbing even higher in October, when regulated energy prices are set to rise again.

The UK unemployment rate fell to 3.9% in the three months to January, while average earnings excluding bonuses were 3.8% higher than a year earlier, around 1% below the level of inflation.


US equities had their best week since November 2020. The S&P 500 rallied 5.0% over the week, while the tech-heavy Nasdaq surged 6.9%.

US president Joe Biden warned China’s President Xi Jinping that the US would retaliate if Beijing actively supported Russia’s invasion of Ukraine.

The Federal Reserve lifted the federal funds rate by 25bps, bringing the target range to 0.25% to 0.5% and marking its first increase since 2018. The Fed also indicated it expects six more rate rises this year, with a further three more hikes expected in 2023, which will take the fed funds rate to 2.8% – above a neutral position that neither boosts nor constrains growth. One FOMC member, James Bullard, president of the St Louis Fed, voted in favour of a larger 50bps saying that rates need to rise above 3.0% this year to combat inflation and for the Fed to avoid “losing credibility”. Fed chair Jay Powell said he saw the US economy as being in strong shape and that the probability of a recession was “not particularly elevated”.

US producer prices rose at an annual rate of 10% in February, the same as in January and the fastest pace on record.


The FTSEurofirst 300 advanced 5.0% over the week, recording their strongest weekly gains since November 2020. The rally means that European stocks have regained levels last seen prior to Russia’s invasion of Ukraine.

The European Commission said EU growth will be “severely impacted” by disruption from the Russia/Ukraine war.

The Zew index of German economic sentiment recorded the biggest decline in its 31-year history, falling to -39.3 in March, from 54.3 in February. This is close to the all-time low of -49.5 reached in March 2020 when the pandemic spread across Europe.

Germany and France unveiled budgetary measures to help businesses and individuals impacted by the fallout of the Russia/Ukraine war. Germany plans an additional €200bn of borrowing while France will help businesses for which the cost of gas and electricity represents more than 3% of turnover (and faced losses in 2022).


The Nikkei 225 climbed 6.6% over the week.

Japan’s top companies have agreed to their largest annual wage increases in seven years, although only a few met the prime minister’s target of a 3% rise.

Pacific Basin

Chinese stocks slumped as COVID-19 cases hit their highest levels since 2020. Shanghai and Shenzhen, two crucial commerce hubs, have been placed in partial lockdown. In Shenzen, all but essential factories in the technology manufacturing hub had to stop production for a week, including Apple supplier Foxconn. After the new restrictions were announced, more than 70 Taiwanese companies operating in the city and dozens of local Chinese manufacturers said they had suspended production.

Russia allegedly asked China for support, raising the prospect of western nations extending sanctions to China. Some reports suggested Beijing had signalled its willingness to supply Russia with military assistance to support its invasion of Ukraine which further negatively affected sentiment towards Chinese stocks.

Liu He, a vice-premier and President Xi Jinping’s closest economic adviser, said the government would take measures to “boost the economy in the first quarter”, as well as introduce “policies that are favourable to the market”.

The news caused share prices to rally sharply, with the Hong Kong stocks posting the strongest daily gains since the 2008 financial crisis. Shares in Tencent, Alibaba and rebounded more than 23%, 27% and 35%, respectively, having fallen sharply earlier in the week following news from the US Securities and Exchange Commission that five Chinese companies could be delisted if they do not hand over detailed audit documents that back their financial statements.

Emerging Markets

Investors waited nervously to see of Russia would default on its debt for the first time since 1998. The country insisted that it had made coupon payments on two of its dollar bonds, although payments to bondholders were being delayed by the need to obtain US Treasury approvals given western sanctions against Russia.

Russian oil exports to India have quadrupled in March as India, the world’s third-largest energy consuming country, snaps up oil that Europe has shunned. Pakistan is also planning to press ahead with a Russian gas pipeline.

Latin America has emerged as one of the few winners from the Russia/Ukraine war, helped by surging commodity prices, western sanctions against Russia and attractive valuations. Brazil is one of the world’s largest producers of soyabeans, crude oil and iron ore, and also benefits from the sharp rally in oil prices; Chile leads the way in copper, while Argentina is a big wheat grower.

Brazilian interest rates are expected to rise by 1% to 11.75% this week and to hit 12.75% by end of the year.


The yield on the 10-year US Treasury bond closed the week close to a three-year high of 2.15%, a rise of 17bps over the week.

The yield on the 10-year German Bund closed the week at 0.37%, a rise of 12bps over the week and its highest level in more than three years. 10-year UK Gilt yields rose 1bp to end at 1.50%.


Brent crude closed the week just short of $108 a barrel. The International Energy Agency that a fall in Russian crude supply to the global market threatened to become the “biggest supply crisis in decades”.

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Image by andreas160578 from Pixabay