The first trading week of 2022 kicked off with markets across the world rattled by clear indications from the Federal Reserve it is going to hike rates. The US central bank released on Wednesday the minutes from its mid-December policy meeting. Shares sell off as investors considered the negative impact of higher interest rates on consumer spending and company debt levels. In senior investment and markets analyst Susannah Streeter’s words: “The realization has dawned on investors that the drug of cheap money is set to be withdrawn a lot sooner than first forecast.” Persistent inflation pressures and mixed data hurt as well.
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AMERICAS
CANADA
The Canadian benchmark TSX was off 0.65%. The mood was cautious amid uncertainty about the near term outlook for the market. On the macro front, the Canadian economy added 54,700 jobs in December, following a 153,700 gain in November and above market expectations of 27,500, data from Statistics Canada showed. The unemployment rate in Canada declined for a seventh straight month in December, falling to 5.9%. Another data from Statistics Canada showed average hourly earnings in the country increased to C$ 31.22 in December over the previous month.
U.S.
Each of the major U.S. stock indices posted weekly losses to kick off 2022. The technology-heavy NASDAQ sustained the biggest blow by far, posting a –4.5% return in its sharpest weekly decline in months as growing expectations for near-term interest-rate increases hit tech stocks more than the broader market. The S&P 500 fell 1.8% and the Dow slipped 0.2%. The minutes from the US Federal Reserve showing it was planning to wind back stimulus soon, triggered much of the anxiety that rippled across markets.
“It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the minutes read. Another mixed nonfarm payroll report added to the uncertainty. The monthly payrolls report showed that employers added only 199,000 jobs in December, roughly half of consensus expectations.
LATAM
In Brazil, stocks as measured by the BOVESPA index returned -2%, extending the losses for the third consecutive week. Brazil recorded in 2021 the highest net inflow of foreign currency through the contracted exchange rate in six years, equivalent to just over US$6.1 billion, after three consecutive years of negative balances, Central Bank data showed Wednesday. The foreign exchange flow was in surplus by US$6.134 billion year-to-date, the best result since 2015 (+US$9.414 billion).
In Mexico, the IPC index was off 0.13%. Chilean stocks as measured by the IPSA returned -0.09%. Chile’s mortgage loan rate exceeded 4% in December, reaches highest level since 2014.
ASIA/PACIFIC
CHINA
Chinese stock indices retreated on concerns of further growth deceleration due to regional lockdowns before the Chinese New Year and ongoing trouble in the property sector.
China services and construction activity improved in December according to the Caixin China PMI Services survey. And the Caixin Manufacturing Purchasing Managers’ Index rose to 50.9, or its highest level since June. China’s Premier Li Keqiang said the government would increase tax and fee cuts for small/micro firms and individual businesses and provide targeted support for COVID-affected sectors. In currencies, the yuan posted its biggest weekly drop since mid-September, reflecting expectations of U.S. monetary tightening. Meanwhile, central bank data showed that China’s foreign exchange reserves rose by USD 28 billion last month to USD 3.25 trillion, boosted by stronger capital inflows.
JAPAN
Japanese stocks turned in a mixed performance.
Clear indications from the US central bank that it is going to hike rates weighed on technology and other growth stocks. The prefectures of Okinawa, Yamaguchi, and Hiroshima are set to implement quasi-states of emergency from Jan 9 till Jan. 31. These are the first restrictions since Prime Minister Fumio Kishida took office. On the data front,
Japan’s household spending tumbled 1.2% in November, the Ministry of Internal Affairs and Communication said on Friday – coming in at 277,029 yen. The services sector’s PMI score was 52.1 last month. That’s down from 53.0 in November, the latest survey from Jibun Bank revealed. The Manufacturing Purchasing Managers’ Index (PMI) fell to 54.3 in December, from November’s 54.5.
AUSTRALIA
The Australian share market managed to finished 0.12% this week.
On Wednesday, the ASX saw the worst daily sell-off since March last year amid the Fed’s more aggressive interest rate stance. In the last hour of trade, the market fell 3%, wiping tens of billions of dollars off the value of shares. In economic news, the services sector in Australia continued to expand in December, albeit at a slower pace, the latest survey from Markit Economics showed on Thursday with a services PMI score of 55.1.
EUROPE
EUROZONE
Shares in Europe ended the week mixed.
Markets digested a host of economic data including annual inflation rate in the Eurozone which hit an all-time high of 5% in December. The main driver of the on-year increase was energy prices, which rose 26.0% on year compared with 27.5% in November. Inflation in Germany, the bloc’s largest economy, came in near a 30-year high and Eurozone’s economic confidence index declined to 115.3 in December from 117.6 in November. Worries that central banks may reduce asset purchases and raise interest rates at a faster pace hurt as well.
CEE/SEE
In Poland, the WIG20 returned 1.99%. The National Bank of Poland’s Monetary Policy Council (MPC) raised the main interest rate by 50 basis points to 2.25% on Tuesday, in line with market expectations, as it aims to ease inflationary pressures. Poland’s annual inflation rate rose for the sixth straight month to 8.6% in December.
In Romania, the BET was higher by 0.39%. The country’s foreign exchange reserves stood at EUR40.4 billion at the end of December 2021, compared to EUR 39.2 billion on 30 November 2021, National Bank of Romania data showed on Monday (Jan. 3). On the banking front, non performing loans ratio in Romania was down to less than 4% in the first ten months of 2021, the central bank said.
REST OF EUROPE
In Russia, equities as measured by the Russian Trading System (RTS) Index plunged 3.17%.
Geopolitical tensions took center stage with deadly clashes in protests in Russia’s southern neighbor Kazakhstan sparked by a substantial increase in liquified petroleum gas prices. Russia sent in troops at the request of the Kazakh president to help restore order to the resource-rich nation.
In the U.K., London’s premier FTSE 100 Index advanced 1.36% as banks and energy rallied. U.K. house price inflation accelerated sharply in December, results of a survey by the Lloyds Bank subsidiary Halifax and IHS Markit showed. The house price index rose 9.8% year-on-year last month, the largest increase since July 2007.
In Switzerland, the SMI was lower by 0.60%. In economic news, seasonally adjusted retail sales increased 1.3% in November on monthly basis, data from Federal Statistical Office showed.
MIDDLE EAST
(Note: Trading 02-06/01/2022 expect Turkey)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) was marked by increases in prices in the benchmark TA-35 index which closed up 1.29%.
In Turkey, the BIST100 index surged by 9.46% despite news that annual inflation rate jumped to 36.08% in December. It was the highest rate since September 2002, as the battered
lira has been slumping to record lows.
In currencies, Libya’s central bank said it received $22.9 bln in foreign currency in 2021.
AFRICA
In South Africa, stocks as measured by the JSE Top 40 index returned 0.30%. The SA rand strengthened against all expectations and is the strongest emerging market currency for 2022 so far, according to TreasuryONE. The SA currency has found support in expectations that the Reserve Bank will hike rates soon. Recent strength in commodity prices and a fairly quiet market also supported the rand.
In Nigeria, the first trading week of 2022 came to a close on a positive note. The benchmark NGX All Share Index jumped 2.66%. The stock market has advanced 1,137.98 base points since the start of the year. At the close of market on Friday, the local bourse’s market value stood at N23.67 trillion.
Content Disclaimer:
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.
For any comments, suggestions or corrections email: kbalkoudi@worldmarketsdaily.com
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.
References:
“Global Markets Weekly Update”. T. Rowe Price. Jan. 07, 2022
“Weekly market wrap”. Edward Jones. Jan. 07, 2022
“Weekly Market Recap”. John Hancock Investments. Jan, 07, 2022
“Schwab Market Update”. Charles Schwab. Jan. 07, 2022
“Market Analysis”. Edmond de Rothschild. Jan. o7, 2022
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