D-PIMS Weekly Market Update - Week of 5th to 11th December 2022
Today’s Monday update:
Over the course of last week, market moving headlines were mostly related to economic and Ukraine matters:
• On Monday, the Group of Seven (G7) price cap on Russian seaborne oil came into force as the West tries to limit Moscow's ability to finance its war in Ukraine, though Russia has said it will not abide by the measure even if it has to cut production. The G7 agreement allows Russian oil to be shipped to third-party countries using G7 and EU tankers, insurance companies and credit institutions, only if the cargo is bought at or below the $60 per barrel cap. Russia is the world's second-largest oil exporter.
• On Tuesday, - A third Russian airfield was ablaze on Tuesday from a drone strike, a day after Ukraine demonstrated an apparent new ability to penetrate hundreds of kilometers deep into Russian air space with attacks on two Russian air bases. It came a day after Russia confirmed it had been hit hundreds of kilometers from Ukraine by what it said were Soviet-era drones - at Engels air base, home to Russia's strategic bomber fleet, and in Ryazan, a few hours' drive from Moscow.
• On Wednesday, China announced the most sweeping changes to its tough anti-COVID regime since the pandemic began three years ago, loosening rules that curbed the spread of the virus but had hobbled the world's second largest economy and sparked protests. The relaxation of rules, which include allowing infected people with mild or no symptoms to quarantine at home and dropping testing for people travelling within the country, are the strongest sign yet that Beijing is preparing its 1.4 billion people to live with the disease. Even though its borders remain mostly shut, citizens cheered the prospect of a shift that could see China slowly emerging back into a world three years after the virus erupted in the central city of Wuhan.
• On Thursday, the number of Americans filing new claims for jobless benefits increased moderately last week, while unemployment rolls hit a 10-month high towards the end of November, suggesting the labour market was gradually slowing down. Still, labour market conditions remain tight, keeping the Federal Reserve on course to continue increasing interest rates as it fights inflation. The labour market has remained resilient in the face of growing recession risks, caused by the Fed's aggressive monetary policy campaign.
• On Friday, Russian forces have shelled the entire front line in the Donetsk region in eastern Ukraine, Ukrainian officials said, as part of what appeared to be the Kremlin's scaled-back ambition to secure only the bulk of lands it has claimed. "The entire front line is being shelled," officials said, adding that Russian troops were also trying to advance near Lyman, which was recaptured by Ukrainian forces in November, one of a number of setbacks suffered by Russia since invading its neighbour in February.
Britain set out 30 measures to overhaul the financial sector on Friday, including a repeal of 'burdensome' EU rules the government says will unlock investment and maintain the City of London as one of the most competitive financial hubs in the world. The planned reforms also include a review of rules put in place following the financial crisis over a decade ago to make bankers accountable for their decisions and easing capital requirements for smaller lenders, after much lobbying by banks. The City has been largely cut off from the European Union by Brexit, putting pressure on the government to ease rules as Amsterdam overtook London to become Europe's top share trading centre, adding to competition from New York and Singapore. Leaving the European Union (EU) allows Britain to write its own rules, but as the EU hosts scores of international banks, it has little room to diverge radically from international norms.
• Over the week, the main global stock markets mainly down, apart from China and Hongkong which were well up. The US was down the most. Over the week, all the D-PIMS portfolios were down, particularly the higher risk portfolios. The portfolios were helped by their China and some of their Absolute Return and Bond holdings.
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The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.