Equities higher as Fed begins tightening monetary policy – Zurich Life Weekly Investment News March 21st 2022

Stocks finished the week higher as the Federal Reserve announced its new policy statement which came with a quarter-point interest rate increase, the first rate rise since 2018. This is the first of several more rate hikes expected by investors as inflation expectations become embedded and pose risks to growth. This rate hike comes amid prices climbing at the fastest pace in 40 years and an uncertain geolpolitical picture sparked by Russia’s invasion of Ukraine. Economic data this week had a limited effect on markets. US retail sales rose 0.3% in February, slightly below economists’ forecasts. The modest increase in February largely reflected higher prices rather than volumes. Meanwhile, data on industrial production and housing underscored a similar backdrop across the economy—price pressure remains hot and supply is still hard to come by.

Shares in Europe gained ground for a second consecutive week amid cautious optimism that negotiations between Russia and Ukraine could yield a diplomatic solution. The Moscow stock exchange remained closed during the week of March 18. Russian bonds moved higher on Friday, buoyed by reports that the correspondent bank had processed interest payments on two of the country’s sovereign bonds and transferred the funds to the payment agent to disburse to investors.

The world’s second largest economy, China, reported better-than-expected activity in the January-February period with help from policy easing measures and the easing of power and chip shortages. However, the world’s most indebted property developer continues to garner the headlines with trading in Evergrande shares halted this week, pending an announcement by the company. While systemic fallout may be limited, the long-term implications are significant.