Market update – 29th June 2022.

Following on from last week’s bounce, many key markets kept up their positive momentum into this week.

China cut its quarantine requirements for travellers, with its quarantine period slashed to 7 days in a government-run facility (previously 14), followed by 3 days isolation at home (previously 7). This has provided some optimism for markets, investors and Chinese companies.

Whilst this type of boost to markets is nice, it is important to look beyond short-term noise (just as we do when we see short-term market dips) and understand what this means for the long-term outlook: this reduction in the traveller quarantine period will make the country more attractive to visitors and is further evidence of China reopening, a key catalyst that should help to release pent up demand and valuations in China.

Earlier in the week, Russia missed its bond payment deadline, indicating a potential default on debt repayments. Whilst this wasn’t a shock (economic sanctions against the country removed the ability for bond payments), nor was it market moving, it is significant given that Russia hasn’t defaulted on foreign debt since 1918.

This came as G7 leaders met for a three-day summit, whereby talk of Russia dominated the agenda. The leaders reaffirmed their commitment “to phase out [our] dependency on Russian energy”. The group of nations are comprising a plan to place a cap on Russian oil and gas prices.

And lastly, as inflation weighs on the cost of living in the US, US consumer confidence came in lower than expected at 98.7. A decrease in this reading suggests a decrease in demand is on the horizon, which will help to ease inflation.

Later today, at a European Central Bank (ECB) event, we will hear from ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Federal Reserve Chair Jay Powell.

Hannah Owen, Portfolio Specialist.

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