Stock markets

A bruising January for stocks is ending

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World equities staged a modest rebound on the last trading day of a volatile month of January.

Investors put aside concerns about geopolitical tensions, persistent inflation pressures and interest rate rises but markets have seen some solid downside pressure to begin 2022 with the MSCI World index down 6.2% in January – the worst start to the year since 2016.

Asian stocks closed mostly higher after a thin trading session on Monday (Jan. 31) with Chinese and South Korean markets closed for the Lunar New Year and markets closing early in Hong Kong and Singapore ahead of the holiday.

Japan’s Nikkei 225 index jumped 1.1%. In India, the S&P BSE Sensex closed up 1.42% while the broader NSE Nifty index advanced 1.39 %.

European stocks also ended on a firm note on Monday. The pan European Stoxx 600 climbed 0.72% but the benchmark is on pace for its worst month since October 2020. Germany’s DAX added 0.99% and France’s CAC 40 rose 0.48%. The U.K.’s FTSE 100 ticked up 0.02%, while Switzerland’s SMI grew 1.01%.

On Wall Street, the major averages are extending the strong upward move seen last Friday but are still on track for monthly losses as investors brace for the upcoming rate hikes from the Federal Reserve.

The Bank of England and European Central Bank are set to announce their latest policy decisions on Thursday. The ‘Old Lady’ is set to announce a 25bps rate hike, following the 15bps rise seen in December, while kickstarting the quantitative tightening process.

Markets have been roiled by volatility this month as investors worry about the standoff over Ukraine, inflation, supply chain issues and the heightened expectations that the Fed will have to be more aggressive with its monetary policy tightening campaign.

Investors have a big week ahead for economic data. The usual start-of-month PMI surveys are due, for the manufacturing sector on Tuesday, and the services sector on Thursday. The latest flash eurozone inflation figures are also due.  However, the headlining event of the week could be Friday’s January U.S. nonfarm payroll report, which will come as the markets remain hyper-sensitive to what lies ahead in terms of Fed action.

“An events-filled week ahead threatens to keep market volatility high,” Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington told Reuters.