World markets continue to grapple with inflation pressures, supply-chain and labor shortage challenges, monetary policy uncertainty, geopolitical tensions and the threat to the recovery from surging energy prices. A strong rise in risk aversion globally was related to the fact that more European countries are reinstating full lockdowns sparking worries the new measures could once again weigh down the global economy. But U.S. department-store earnings showed fresh strength as the all-important American consumers appear poised to open their wallets this crucial holiday season.
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The U.S. equity markets finished mixed on a weekly basis.
The S&P 500 and the Nasdaq saw gains but he Dow Jones ended the last 5 trading sessions down. Market activity was generally subdued as the Thanksgiving holiday week approached. This week’s macro data showed that the world’s largest economy had started the fourth quarter on the front foot. The Commerce Department reported that retail sales rose by 1.7% in October, the biggest gain since March with big retailers reporting higher sales and expectations for a solid finish to the year. And industrial production rebounded by 1.6% last month, after the 1.3% contraction in September.
News out of Washington was again in focus, as the U.S. House of Representatives on Friday narrowly passed President Biden’s $1.75 trillion social spending bill, sending it to the Senate where divided moderates and liberals still need to reach agreement. Next week will be shortened by the Thanksgiving holiday market closures on Thursday (Nov. 25) and a short session on Black Friday (Nov. 26).
The Canadian stock market recorded a weekly loss of 0.98%.
Weak crude oil prices and worries about growth weighed on sentiment. Energy stocks were the major losers on Friday, as oil prices, one of Canada’s major exports, fell on worries of a further hit to fuel demand. Both WTI and Brent are on track for a fourth straight week of losses, which is the longest weekly losing streak since March 2020. Data released by Statistics Canada showed retail sales in the country dropped by 0.6% in September over the previous month. Statscan forecast that retail sales would increase by 1.0% in October. Meanwhile, prices of new homes in Canada rose 0.9% over a month earlier in October, after rising by 0.4% in September. Year-on-year, the index rose 11.5% last month.
In Brazil the equity market plunged this week.
Brazilian stocks as measured by the Bovespa index returned -3%. The director of international affairs and corporate risk management of the Central Bank (BC), Fernanda Guardado, during an event promoted by the Association of Banks in the State of Rio de Janeiro (Aberj) said that the monetary authority does not work with a stagflation scenario for the Brazilian economy. She also pointed out that some sectors “will be pillars of growth” in 2022, such as farming and services.
In Chile, the S&P IPSA Index plunged -2.8%. Chilean financial markets have been under intense pressure in 2021, in an unusual scenario marked by political elections. On Sunday (Nov. 21) Chile will hold one of the most critical, uncertain, and exciting presidential elections since 1990. Meanwhile, Chile’s foreign debt increased by US$ 19.025 billion during the third quarter compared to the previous one, reaching a total of US$ 233.155 billion, which is equivalent to 81.3% of the Gross Domestic Product (GDP).
Japanese stocks gained for the week.
The government unveiled a larger-than-expected stimulus package (JPY 55.7 trillion-around USD 490 billion)which will feature substantial subsidies for households and businesses. The total package, which includes funds that do not lead to immediate spending like emergency bank loans for struggling companies, will likely reach 78.9 trillion yen, the second largest ever. Critics of the package focused on its eye-popping scale and are skeptical on whether the stimulus can give a lasting boost to stocks and the economy.
Japan is bucking a global trend towards dialing back crisis-mode policies and adding strains to its already tattered finances. Bank of Japan Governor Haruhiko Kuroda expects an improving trend in the overall economy to become evident in the first half of next year. In a speech to business leaders, he reaffirmed his commitment to powerful monetary easing.
Chinese equities turned in a mixed performance.
E-commerce giant Alibaba’s disappointing earnings, heightening worries about Beijing’s broad regulatory crackdown and slowing growth in the world’s second biggest economy kept investors cautious. Alibaba shares listed in Hong Kong dropped more than 10% on Friday dragging down Hong Kong’s benchmark Hang Seng Index (HSI). The People’s Bank of China (PBOC) continued to signal its support for the economy as it will introduce a targeted re-lending program with a quota of 200 billion yuan (about 31.3 billion U.S. dollars) to support the domestic coal sector. In politics, Chinese President Xi and his American counterpart Joe Biden held a virtual meeting, with some signs of a positive tone but no major deliverables were announced.
The Australian market finished lower for the week
despite Friday gains when shares of Crown Resorts soared more than 16.57% after a $6.2 billion buyout offer from investment firm Blackstone. It was a down week for the financial, materials and energy sector. “While I believed our market would rise until January or February, I am starting to think the opposite might occur,” Dale Gillham Chief Analyst at Wealth Within told the Sydney Morning Herald on Friday. “One thing I am sure of is that any move down will be good for the market, as it will set it up for a good year in 2022.” In economic news, the wage price index in Australia was up 2.2% on year in the third quarter of 2021, in line with expectations. Reserve Bank of Australia Governor Philip Lowe said the latest data and forecasts do not warrant an increase in the cash rate in 2022.
Major European markets were mixed as new Covid-19 restrictions are testing risk bulls.
Austria will enter a nationwide lockdown from Monday, becoming the first country in western Europe to re-impose a full coronavirus lockdown this fall. Germany announced more restrictions for unvaccinated people and the Netherlands imposed a three-week partial Covid lockdown last week. Europeans are staging protests against new Covid-19 restrictions in Rotterdam, Vienna, and other cities.
In Italy, protests have taken place on weekends for several weeks, Annual inflation rate in the eurozone increased to 4.1% in October from 3.4% in September, the highest reading since July of 2008 while European Central Bank (ECB) officials said it is getting harder to predict inflation levels. The bloc continues to battle surging energy costs while supply shortages persist and Germany suspended approval for the Nord Stream 2 pipeline from Russia.
The lowest annual inflation rates were registered in Malta (1.4%), Portugal (1.8%), Finland and Greece (both 2.8%). The highest annual rates were recorded in Lithuania (8.2%), Estonia (6.8%) and Hungary (6.6%), Eurostat data showed.
Speaking at the 31st Frankfurt European Banking Congress 2021, ECB President Lagarde said the central bank should not look to tighten monetary policy as it could hamper the region’s recovery.
In Hungary, the BUX index returned -1.59%.
Hungary’s central bank raised its base rate by 30 basis points – in line with forecasts but disappointing for some investors who expected a faster pace of tightening after a jump in inflation. Sticky inflation risks force Central and Eastern Europe central bankers to keep on hiking rates, ING economists say. The Vienna Initiative of banks in its NPL monitor for the 17 countries in the CESEE region warned that many economies “remain fragile and significant disparities in performance can be observed”.
In Romania, the BET was off 0.63% as the country is still trying to cobble together a government. The Romania’s leu is one of the eight worst performing world currencies this month. On the bright side, financing rounds unfolded through Bucharest Stock Exchange exceed EUR 1.5 billion in the first 10 months of 2021 and Romania’s Q3 2021 economic advance was the highest in the EU, according to Eurostat. Seasonally adjusted GDP increased by 8% y-o-y in Romania, while the EU average was 3.9%
REST OF EUROPE
In the U.K., the FTSE 100 fell 1.69%.
Annual inflation rate in the UK jumped to 4.2% in October, the highest since December of 2011 and above market forecasts of 3.9%. Higher energy costs were a big part of the uptick in consumer prices, reflecting a global surge in energy and specially gas prices. This CPI print should, coupled with Tuesday’s solid slate of labor market data (the number of payroll employees increased by 160,000 to 29.3 million between September and October) make a 15bps Bank of England (BoE) hike next month a done deal. BoE Governor Andrew Bailey has told MPs that he’s “very uneasy” about the UK’s inflation situation. Meanwhile, UK budget registered its second-biggest October borrowing since monthly records began in 1993 and also stayed above expectations.
In Switzerland, the SMI gained 0.23%.
Of note, special purpose acquisition companies (SPACs) will be listed and traded on Switzerland’s stock exchange SIX from December 6. Switzerland’s producer and import prices rose 5.1% year-on-year in October. The producer price index increased 3.1% annually in October and import prices accelerated 9.4%.
In Israel, the Tel Aviv Stock Exchange’s TA35 index increased 0.6% over the week
bringing year-to-date cumulative gains to 26.8%. On the macro front, the Gross Domestic Product (GDP) in Israel expanded 5.90% in the third quarter of 2021 over the same quarter of the previous year. Meanwhile, the country’s annual inflation rate rose for the eighth straight month to 2.3% last month. The rate of unemployment excluding those temporarily absent from work increased from about 5.1% in the first half of October 2021, to about 5.6% in the second half.
In Saudi Arabia, the TASI fell 1.58%, recording its third weekly loss in four.
The drop came as oil prices fell to a six-week low before recovering some ground. Crude is on track for a fourth straight week of losses for the first time in more than a year.
In Turkey, stocks, as measured by the BIST-100 Index, returned about 6.0% for the week.
The Central Bank of Turkey slashed its one-week repo auction rate by 100bps to 15% in line with the median estimate in a Bloomberg survey.
The Turkish lira fell to a record low versus the U.S. dollar after the central bank cut borrowing costs for a third straight month and has weakened more than 20% since the central bank started cutting rates in September. The country grapples with inflation at near 20% in October, well above the bank’s mid-point target of 5%. The Turkish currency is down almost 11% in November.
In South Africa, the JSE Top40 was up 0.96% this week.
The South African Reserve Bank raised its benchmark repo rate by 25 bps to 3.75% against market expectations of 3.5%. This is the first rate hike in three years, triggered by the risky outlook on inflation over the medium term. SARB lowered SA’s gross domestic product (GDP) projections to 5.2% in 2021, down from 5.3%, but kept unchanged at 1.7% in 2022. The interest-rate increase provided little support for the SA’s rand, which fell to its weakest levels this year.
In Nigeria, stocks as measured by the NSE All Share Index, returned -0.12% for the week.
The combined market capitalization of the stocks worth over one trillion (SWOOT) appreciated by 0.86% to close at N15.70 trillion from N15.57 trillion the previous week, reflecting a gain of N134.45 billion.
This page has been prepared for informational purposes only. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
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Kyriaki Balkoudi is a markets editor for World Markets Daily. She has a bachelor’s degree in Balkans Studies from Aristotle University of Thessaloniki, Greece and a master’s degree in International Politics from City University London, UK.
“Global Markets Weekly Update”. T. Rowe Price. Nov. 19, 2021
“Weekly market wrap”. Edward Jones. Nov. 19, 2021
“Weekly Market Recap”. John Hancock Investments. Nov.19, 2021
“Schwab Market Update”. Charles Schwab. Nov. 19, 2021
“Market Analysis”. Edmond de Rothschild. Nov.19, 2021
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