Tellimer

Weekly Radar: Inflation tops week’s agenda and will dictate market direction

  • Russian equities rise robustly supported by reflation and high crude prices
  • New global corporate tax proposal creates further headwinds for the tech sector
  • Talk of tapering and interest rate hikes gain momentum

Russian equities rise robustly supported by reflation and high crude prices: Emerging markets rallied again last week and Russia was among the outperformers as the reflation trade remained on track. Oil & gas stocks supported by higher oil prices were the main drivers behind the advance of the Russian equity market – RTSI (+4.9% w/w @ 1,647) and IMOEX (+4.0% w/w @ 3,807). The EM stock universe rebounded strongly last week supported by high commodity prices – MSCI EM index (+3.8% w/w). The MSCI All-World Index edged higher as the focus switched to economic recovery (+0.6% w/w). Developed markets lagged somewhat due concerns over inflation - S&P 500 (+1.8% w/w) and StoxxEuro600 (+1.8% w/w). The ruble advanced last week (RUB +0.5% w/w @ 73.24) supported by two-year high oil prices (Brent +8.2% w/w @ 71.90).

New global corporate tax proposal creates further headwinds for the tech sector: The G7 nations reached a landmark deal on Saturday to introduce a minimum corporate tax rate of 15% targeted in particular on multinational tech giants such as Amazon, Facebook and Google to reduce their incentive to shift profits to low-tax offshore havens. That could generate hundreds of billions of dollars to help governments left cash-strapped by the Covid-19 pandemic. Facebook said it expected it would have to pay more tax, in more countries, as a result of the deal, which comes after eight years of talks that gained fresh impetus in recent months after proposals from US President Joe Biden's new administration. The meeting was the first time finance ministers have met face-to-face since the start of the pandemic. US Treasury Secretary Janet Yellen said the "significant, unprecedented commitment" would end what she called a race to the bottom on global taxation. German Finance Minister Olaf Scholz said the deal was "bad news for tax havens around the world". Yellen also saw the G7 meeting as marking a return to multilateralism under Biden and a contrast to the approach of U.S. President Donald Trump, who alienated many US allies. The tax deal is mainly targeted at and most likely to effect global tech large-caps. This generates an additional headwind for tech stocks which are already grappling with inflation and higher Treasury yields. While Russian tech names are not in the firing line, they are likely to catch a downdraught from the negative sentiment this will place on the US tech giants.


Most Viewed See latest
Disclosures

The contents of this document have been prepared by Joint Stock Company “Alfa-Bank” ("Alfa Bank") as Investment Research within the meaning of Article 36 of Commission Delegated Regulation (EU) 2017/5...

Full Tellimer disclaimers