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Traders see inflation as 2022's biggest market mover - survey


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Reuters.pngEconomyFeb 23, 2022 
 
 
 
Traders see inflation as 2022's biggest market mover - survey© Reuters. A picture illustration of U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel

By Lucy Raitano

LONDON (Reuters) - Inflation will have the biggest impact on global markets in 2022, traders said, while liquidity was the top daily trading challenge for a sixth year, according to an annual survey of institutional trading clients by JPMorgan (NYSE:JPM) published on Wednesday.

About 48% of 718 institutional trading clients surveyed at the end of November 2021 highlighted inflation as this year's biggest market mover, displacing the global pandemic, which topped last year's list.

Market expectations of impending interest rate hikes have been rising since late last year, and hopes that the trend would be transitory have receded in recent weeks as major countries have struggled with soaring inflation readings.

Economic dislocation and the pandemic were the next factors seen as having the biggest impact, each polling at 13%.

"The expectation is that this focus and concern will likely lead to more market activity and volatility given that inflation has not been a theme for over a decade," said Scott Wacker, head of FICC e-Commerce sales at J.P. Morgan, "This will continue to reinforce the importance of liquidity and consistency of pricing which continues to play into the hands of electronic trading."

Trading through electronic channels has risen in recent years and traders across all asset classes expect this upward trend to continue for the next two years, the survey found.

"We’ve had two years of pretty unusual circumstances with the pandemic - a lot of clients moved away from the office and to the home environments during a very volatile market environment, it was the perfect storm for increasing electronic trading," JP Morgan's Wacker said.

Mobile trading applications were seen as the main influence shaping markets in the next year, selected by 29% of traders.

Notably, artificial intelligence and machine learning are soon expected to overtake mobile tech as the main influencers, partly because many traders expect to have mobile tech in place by then, JP Morgan's Wacker said.

Nearly half of those surveyed said artificial and machine learning will be the most influential factor shaping the future of trading in three years, followed by blockchain with 24% of the vote.

Currency markets beat their fixed income counterparts in terms of proportion of trading through e-channels, which stood at 69%, according to the survey. FX traders expect this to jump to 85% by 2023.

Rates and credit traders expect increases of 17% in the proportion of trading executed through e-trading channels.

 

"Credit is a new frontier market for algo trading, a lot of the new technology that is emerging is in credit," said Wacker, adding that JP Morgan is trading some corporate bonds using algos across the US, EMEA and EM.

Algo trading or algorithmic trading refers to the business of using fast-paced computing software to trade markets. They have become a powerful tool in volatile markets in recent years.

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Puma predicts strong 2022 even as inflation weighs

Reuters.pngStock MarketsFeb 23, 2022 
 
 
 
Puma predicts strong 2022 even as inflation weighs© Reuters. FILE PHOTO: The logo of German sports goods firm Puma is seen at the entrance of one of its stores in Vienna, Austria, March 18, 2016. REUTERS/Leonhard Foeger

BERLIN (Reuters) -German sportswear maker Puma said on Wednesday it expected sales to grow at least 10% on a currency-adjusted basis in 2022 but it cautioned that COVID-19 restrictions and inflationary pressures would limit profit growth.

Puma expects 2022 operating earnings to come in at 600 million to 700 million euros ($679 million-$792 million), up from 557 million in 2021, and said net earnings should improve correspondingly.

Puma had already reported stronger-than-expected preliminary quarterly sales and core profit in January, with fourth-quarter sales up a currency-adjusted 14%.

Puma said higher freight costs and raw material prices, as well as operating constraints due to COVID-19, would weigh on profitability.

"COVID-19 is unfortunately still negatively affecting our supply chain, inflationary pressures are having a negative impact on our costs and operating margins and the geopolitical situation remains very tense," Chief Executive Bjorn Gulden said in a statement.

"But I remain very optimistic for the future of both our sector in general and Puma in particular."

Like other Western brands, Puma has come under fire in China for saying it would not source cotton from Xinjiang after reports of human rights abuses against Uyghur Muslims. Beijing denies any abuses.

Puma said fourth-quarter sales fell 5.4% in Asia/Pacific, pulled down by the Greater China market due to COVID-19 restrictions and "geopolitical tensions," while almost all other markets in the region reported double-digit growth.

 

Rival Nike Inc (NYSE:NKE) said in December it was more confident of easing supply chain issues in its next fiscal year as it beat quarterly revenue and profit estimates, even as its sales fell 20% in Greater China.

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