Equities

In general, equity markets continued to retreat as the Russia/Ukraine conflict intensified. US indices suffered their worst weekly decline since January, taking the Nasdaq into a bear market. Asian equities also declined, especially in China and Hong Kong where the authorities’ zero-Covid approach was thrown into jeopardy by a sharp rise in infection levels. In contrast, European shares rebounded from their steep sell-off in the previous week.

Bonds

Bonds sold off as yields rose once more. The yield on the 10-year US Treasury bond neared 2.0% after stronger-than-expected US inflation increased speculation that the Federal Reserve may need to be more aggressive in raising rates. European bond yields also increased after the European Central Bank (ECB) appeared to take a more hawkish stance.

Currencies

The US dollar advanced against other major currencies as continued high levels of US inflation underpinned the probability of the Federal Reserve raising rates. The euro also made ground against sterling and the yen, helped by the ECB’s more hawkish tone.

Commodities

Oil prices initially surged, with Brent crude approaching $140 a barrel, its highest level in 14 years, before falling (-4.6% for the week) after the UAE encouraged other OPEC members to increase production. Gold rallied 0.9%, edging closer to $2,000 a troy ounce.

Responsible investing

A growing number of companies moved to suspend sales/operations in Russia. President Biden banned the import of Russian oil and gas; the UK said it would phase out all Russian oil imports by the end of this year; and the EU said it would cut Russian gas imports by two-thirds within a year.