Trading in world stock markets in the last week of the year was marked by increases in prices in the leading share indices. A year which in so many ways was just as miserable as the previous one, is now over and was crazy where money was concerned. World stock markets closed out 2021 with double-digit gains for the third consecutive year but the overarching view on Wall Street is that 2022 will be a bumpier ride.
“Investors were pretty spoiled this year. So be aware that next year won’t be as easy” Ryan Detrick, chief market strategist at LPL Financial, told Reuters. As markets were detached from fundamental reality, in 2022 reality will make its presence felt.
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The Canadian stock market ended the week 0.03% lower. However, the S&P/TSX Composite gained 21.74% in the year, its best annual performance thanks largely to the gains in the energy sector. Healthcare stocks were the weakest as they have lost nearly 22% in 2021 due to tax-loss selling, mostly toward the end of the year.
Most of the major indices recorded gains for the week and posted double-digit returns this year as 2021 turned out to be a particularly strong year for the markets. For the year, the S&P 500 spiked by 26.9%, while the Nasdaq and the Dow soared by 21.4% and 18.7%, respectively. The major averages all moved higher for the third straight year. “2021 was another exceptional year for U.S. equity markets,” Wells Fargo Investment Institute’s Chris Haverland said in a note. “The markets were supported by … highly accommodative fiscal and monetary policies.” Looking ahead, US analysts warn that 2022 could be a more difficult year for markets.
In Brazil, the Bovespa finished 11.8% lower in 2021, the first yearly decline since 2015, when the country entered an economic recession. The deterioration in Brazil’s economic outlook, high inflation, and an aggressive monetary tightening, as well as political and fiscal uncertainties, a combination that turned the stock gauge into the world’s second-worst performing national equity index this year.
In Mexico, the IPC added 0.79% over the week. The index increased 9206 points or 20.89% since the beginning of 2021. In currencies, Mexico’s peso has lost 2.4% this year, but is the best performer among its Latin American peers primarily on crude oil strength. Brazil’s real , Chilean, Colombian and Argentine pesos were all down between 7.2% and 22% this year.
Japan’s Nikkei 225 Index returned 0.03%. On the macro front, Japan’s unemployment rate increased to 2.8% in November from the previous month’s 2.7%. On the bright side, industrial production grew by a record, seasonally adjusted 7.2% month on month in November amid easing supply-side pressures. Industries that mainly contributed to the increase were motor vehicles, plastic products and iron, steel & non-ferrous metals, according to Ministry of Economy, Trade and Industry data. The ministry upgraded its assessment and now expects production to increase through January 2022.
Chinese markets ended the week with modest losses. Positive manufacturing data and comments from Chinese officials about the country’s beleaguered property sector boosted sentiment. China’s official manufacturing and non-manufacturing Purchasing Managers’ Index (PMI) readings rose more than expected in December. On the regulatory front, China’s securities watchdog unveiled draft rules to govern overseas share sales by the country’s firms. Chinese companies set up as variable interest entities (VIEs) seeking IPOs in offshore markets would have to register with the securities regulator and meet compliance rules, according to a draft of a new regulation released by the China Securities Regulatory Commission (CSRC).
In a holiday-shortened week, the benchmark S&P/ASX200 Index gained 0.33%. The index settled at highest in more than three and a half months on Thursday and gained 13% in 2021 boosted by government stimulus and higher company profits. While Australia’s share market gains this year have been strong, they have been left behind by US markets.
European equities rose in holiday-thinned trade. Germany’s DAX Index ended the week 0.82% higher, France’s CAC 40 increased 0.94% and Italy’s FTSE MIB advanced 1.22%. The DAX advanced 15.8% in the year, France’s CAC 40 surged up 29% while The Stoxx 600 added about 22%.
Spain’s fragmented parliament gave final approval Tuesday to the biggest budget in the country’s history, that includes funds disbursed under the European Union’s
Covid-19 recovery fund. The Italian Chamber of Deputies on Thursday also passed the government’s 2022 budget. Italy’s EUR 32 billion budget includes income and business tax cuts and the creation of a climate fund.
In Poland, the WIG20 was up 1.85%The growth potential for WIG20 companies is approx. 7% in 2022, Ipopema Securities analysts estimate. However, “dangers are lurking”. As long as inflation remains uncomfortably high, central banks may be less inclined to pursue dovish monetary policy, even at the risk of markets suffering broader, more severe falls, the analysts warn.
In Romania, the Bucharest Stock Exchange’s BET index returned 0.71% through the close of business on Thursday and ended 2021 with a 33.2% return. Tuesday marked the BET’s first close above 13,000-points since its launch in September 1997. However, Romanian Leu ended 2021 below the psychological threshold of 5 units versus the euro.
REST OF EUROPE
In Russia, stocks, according to the Moscow Exchange Index, returned 2.28% through the close of business on Thursday. Friday was a holiday. Russian President Vladimir Putin and US President Joe Biden held a 50-minute a phone call on Thursday (Dec. 30) to discuss a range of topics, including the crisis in Ukraine. While the tone of the call was constructive, according to a Kremlin aide, no compromises had been reached.
In the UK, the FTSE 100 was up 0.17% for the week despite slipping into the red on the final trading day of 2021. London’s premier index of blue-chip shares ended 2021 with its best annual performance in five years, rallying by 14.3% on the back of gains in commodity-linked and industrial stocks. London has also benefitted from a boom in IPO activity. Despite the gains, British blue-chip shares underperformed their European and U.S. peers, which have scaled multiple record highs.
In Switzerland, the SMI was higher by 0.71%. The index gained about 20.3% in the year.
(Note: Trading between 26-30/12/2021 except Turkey)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the last week of the year 2021 was marked by increases in prices in the leading share indices, similar to the trend in stock exchanges worldwide. The index increased 1.5% over the past week, bringing year-to-date cumulative gains to 32.0%. In other news, the Bank of Israel released figures indicating that foreign investors acquired US$ 460 million net in shares in October 2021.
In Turkey, the BIST-100 Index returned -1.78%. The stock market stabilized somewhat following strong gains in the first half of December and a sharp drop in the days prior to Christmas. However, the lira- by far the worst performer in emerging markets in 2021- continued to struggle versus the U.S. dollar. The Turkish currency shed 44% of its value against the dollar over the year and 19% in the last week alone.
In South Africa, the JSE Top40 jumped 3.12% for the week. The benchmark FTSE/JSE Africa All Share Index rose about 3.0% but slipped 0.1% in 2021’s final session on Friday, trimming its annual advance to 24%. South African stocks closed out their best year since 2009, although the gains had little to do with local factors, according to Bloomberg. The success of the stock market can be attributed to increased demand for commodities with mining giants Anglo American and BHP Group being major contributors to the gains.
In Nigeria, the Nigerian Stock Exchange All Share Index returned 1.07% this week and closed the year 2021 with a 6.07% gain. The All Share Index opened the year 2021 at 40,270.7 and closed with 42,716.4 points at the close of trading on December 31st, 2021. A total of 72 stocks post year-to-date gains while another 55 posted losses all year round and the rest flat with no gains or losses.
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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.
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