world stock markets

World stock markets in a downward spiral

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Shockwaves hit world markets this week as Russia-West tensions continued and as investors awaited cues from the U.S. Federal Reserve on policy tightening. Angst about the Fed’s determination to remove its ultra-loose monetary policy is dealing a severe blow to the rally in markets that has run virtually uninterrupted for nearly two years. Investors brace for pain.


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AMERICAS

CANADA
The Canadian market extended its losses. Sentiment was weighed by rising worries about inflation and imminent interest rate hikes. The benchmark S&P/TSX Composite Index plunged 3.45% this week. Shares of e-commerce company Shopify Inc. sank more than 13% Friday amid a broad-based selloff in tech stocks, bringing the year-to-date drop of the company’s market capitalization to about $79-billion. On the data front, retail sales in Canada likely fell 2.1% month-over-month in December 2021, Statistics Canada said. And Canada’s new home prices increased 0.2% from a month earlier in December, decelerating from a 0.8% rise in November.

U.S.

Stocks in the U.S. continued a rough start to 2022. Both the Dow Jones and S&P 500 closed out their third straight week of losses and their worst weeks since 2020. The tech-heavy Nasdaq posted a 7.6% loss for the holiday-shortened week,  its biggest weekly drop since the beginning of the Covid crisis. Markets were closed Monday in observance of the Martin Luther King, Jr., holiday.

The mood turned jittery ahead of the FOMC on January 25-26 as the spectre of rising interest rates dampens investor interest in higher-risk equities. Streaming giant Netflix, the first major tech stock to report earnings this season, tumbled 21.8% on Friday after the company’s fourth-quarter earnings report showed a slowdown in subscriber growth, the latest setback for technology investors. Disappointing macroeconomic figures also weighed. New jobless claims hit a 3-month high and the Empire State survey fell sharply.

Nasdaq

LATAM

Major Latin American markets turned in a mixed performace. In Mexico, stocks came under pressure with IPC Index sinking 3.99% due to Mexico’s proximity to the weak U.S. equity market.
In Brazil, the Bovespa Index returned about 1.9%. Chilean shares, as measured by the S&P IPSA Index, advanced 3.5%.  In Chile, president-elect Gabriel Boric  appointed on Friday as future Minister of Finance the current president of the Central Bank, Mario Marcel. Business people say political and economic uncertainty are main risk for the country in 2022, EY and DF’s Business Expectations Survey showed. Thousands of Chileans joined this Thursday, January 20, the so-called Great March in Defense of Lithium to reject the government’s policy of Sebastián Piñera to privatize this natural resource, local media reported.

ASIA/PACIFIC

JAPAN

Japanese markets fell for the week as a quasi-state of emergency imposed on Tokyo and 12 other prefectures weighed on sentiment. As widely expected, the Bank of Japan (BoJ) left its key short-term interest rate unchanged at -0.1% and that for 10-year bond yields around 0% during its January monetary policy meeting. BoJ lifted its inflation projection for the next fiscal year citing rising commodity prices and stressed that it will maintain its ultra-loose monetary policy even as its global counterparts seek to exit from crisis-mode policies. Policymakers also lowered the GDP growth for the current FY to 2.8% from 3.4%, amid lingering supply constraints. Meanwhile, economic data showed that exports rose 17.5% year on year in December while overall consumer prices were up 0.8%.

CHINA

Chinese stock market returns were positive for the week. The People’s Bank of China (PBOC)reduced its benchmark lending rate for the second straight month as the economic growth weakened at the end of 2021. China’s gross domestic product expanded at better-than-expected 4% in the fourth quarter of 2021 (vs. 3.3% estimated), but slowing from the third quarter’s 4.9% expansion pace. The central bank also pledged to expand its monetary policy toolkit, push for faster credit growth, and front-load policy easing to turn market expectations around.

AUSTRALIA

Australian markets wrapped up their worst week in more than a year. The S&P/ASX200 lost 2.95% for the last five days, but has gained 5.52% over the last 52 weeks. Eleven sectors declined with Information leading the losses (-4.41%), followed by Health Care (-4.35%) and Telecommunications (-3.68%). On the macro front, the unemployment rate in Australia fell to 4.2% in December, beating handily expectations for 4.5% and down from 4.6% in November.

ASX200

EUROPE

EUROZONE

European stock markets returns were negative for the week as worries over inflation and tensions between Russia and the West persisted. Sentiment took another knock as expectations grew that the European Central Bank (ECB) would raise interest rates this year with some ECB members more worried inflation will stay high. Rampant Eurozone inflation (at a record high of 5% in December) is clearly a headache for the Frankfurt-based institution. The mood was also compounded by investor caution as the first full-year results started to come in.

CEE

Stocks in CEE fell affected by geopolitical tensions over Ukraine. In Poland, the WIG20 shrunk by 4.59%. In Hungary, the BUX was off 0.96%. Investors are looking ahead to the central bank’s rate-setting meeting next Tuesday. A Reuters poll of analysts expects the base rate to be hiked by another 30 basis points to 2.7%

REST OF EUROPE

Equities sank in Russia as investors continued to ditch Russian assets amid geopolitical turmoil. The dollar-denominated RTS index of leading Russian shares slumped 5.65% over the week  and fell 7.29% on Tuesday to 1,367.45 points, hitting its lowest level since late 2020.

In the UK, London’s premier FTSE 100 Index slipped 0.65%. Expectations grew that the Bank of England (BoE) would also need to tighten its monetary policy as data showed inflation hit a 30-year high in December. Earlier in the week, the Treasury Committee questioned BoE representatives, including Governor Andrew Bailey on the nation’s financial stability. Bailey told a committee of lawmakers that he was concerned that elevated UK inflation might last longer than previously forecast, due to surging energy costs and signs that wage demands are rising. On the bright side, the country relaxed most coronavirus restrictions.

STOXX600

MIDDLE EAST

(Note: Trading between 16-20/01/2022 except Turkey)

ISRAEL

Trading in the Tel Aviv Stock Exchange (TASE) in the third week of January was marked by decreases in prices in the leading share indices, similar to the trend in leading stock exchanges worldwide. The TA-35 index decreased this week by 2.5%, bringing year-to-date cumulative gains to 2.1%. Despite declines recorded in the past week, it is important to note that since the beginning of the year, the TASE has been overperforming vs. the global market.

On the macro front, data released by the CBS indicate that Israel’s annual inflation rate rose for the tenth consecutive month to 2.8% in December from 2.4% in the previous month, above market expectations of 2.6%. It was the highest rate since September of 2011.

TURKEY

In Turkey, the benchmark BIST 100 index sank 3%. The Central Bank of Turkey paused its easing cycle and left the key one-week repo rate steady at 14.0% as expected at Thursday’s scheduled monetary policy meeting.  A day earlier, Turkey and the United Arab Emirates said they had agreed a nearly $5-billion swap deal in local currencies. Turkey’s central bank has been establishing FX swap lines with central banks of other countries, including Qatar, China, as Ankara faces economic turmoil.

AFRICA

SOUTH AFRICA

In South Africa, stocks as measured by the JSE Top 40 index returned -0.38% amid a broader fall in emerging and developed equity markets. The annual inflation rate in SA hit 5.9% last month, from 5.5% in November, above market expectations of 5.7%.That was the highest annual rate since March 2017, when it increased by 6.1%. Meanwhile, the World Bank announced on Friday morning that it had approved the African country’s request for $750 million (about R11.4 billion) loan.

NIGERIA

In Nigeria, markets bucked the global trend. The All-Share Index jumped 3.38%. Nigerian stocks hit a 13-year high on Thursday after experiencing 3 straight days of solid gains rallying the benchmark index past 45,000 points for the first time since 2008. The rally continued on Friday with the ASI closing up 0.15% to 45,957.35 points.


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. 21, 2022
“Weekly market wrap”. Edward Jones. Jan. 21, 2022
“Weekly Market Recap”. John Hancock Investments. Jan, 21, 2022
“Schwab Market Update”. Charles Schwab. Jan. 21, 2022
“Market Analysis”. Edmond de Rothschild. Jan. 21, 2022


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