Trading in major world stock exchanges was marked by increases in prices in the leading share indices. Focus turned to earnings with investors also digesting the monetary policy announcements from the Bank of England and the European Central Bank. Pressure mounts for policy moves to combat inflation. Oil prices continued to rise.
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Canadian stock markets generated a positive return for the week with the TSX jumping 2.56%, its biggest advance since March last year. A seven-year high for oil prices bolstered the index’s attractiveness to foreign investors. Data from Statistics Canada showed a bigger than expected decline in jobs in the month of January, but analysts expect a quick rebound in coming months and investors largely shrugged off the data and picked up stocks. The unemployment rate in Canada rose to 6.5% from an upwardly revised 6% in the previous month.
After starting 2022 with three straight weekly declines, US equity markets recorded overall gains for the second consecutive week. The tech-heavy Nasdaq gained nearly 2.5%, while the Dow Jones and the S&P 500 gained 1.1% and 1.5%, respectively. The week’s heavy calendar included jobs data , central bank comments and earnings reports from Amazon, Snap Inc., Pinterest, PayPal and Facebook parent Meta among others. The latter cratered 26.4%, wiping out $251bn in market cap, the biggest cap drop ever in one trading day. Labor market data showed that the U.S. economy generated 467,000 jobs in January exceeding economists’ expectations by a wide margin. Manufacturing prices also rose more than expected last month.
Brazilian stocks as measured by the Bovespa Index, returned about 0.3%. The Central Bank of Brazil unanimously decided to raise the Selic rate by 150 basis points to 10.75% on Wednesday as expected. It was the eighth consecutive interest rate hike since it has started tightening. The bank also revised inflation expectations upwards for 2022 to 5.4% (from 4.7%) due to a higher tariffs rate.
Meanwhile, recent growth indicators released for the last quarter of 2021 showed a slightly better than expected performance for the economy. In Mexico, the IPC was up 1.17%. January PMI declined to 51, but was still above the 47.5 pre-Covid level. The government is preparing a new stimulus package.
Japanese stock markets notched their first weekly gain in five. The Nikkei average marked a weekly gain of 2.7%, its best performance since mid-October. Reassurances from the Bank of Japan (BoJ) that it had no plans to modify its policy boosted broader sentiment. On the data front, the manufacturing sector continued to expand in January, and at a faster pace, the latest survey from Jibun Bank showed on Tuesday with a manufacturing PMI score of 55.4. The services sector dropped into contraction territory in January, with a services PMI score of 47.6. The unemployment rate came in at a seasonally adjusted 2.7% in December. Industrial production fell 1.0% month on month in December compared with the previous month’s 7.0% increase, according to data from the Ministry of Economy, Trade and Industry (METI).
China’s markets were closed for Chinese New Year and the Beijing Winter Olympics kicked off on February 4. In economic news, official manufacturing PMI declined to 50.1 in January from December’s 50.3 reading, or slightly better than the 50 level expected. The 50 mark separates expansion from contraction. The Caixin manufacturing PMI fell to 49.1, or short of the 50 expected, hitting its lowest level since February 2020.
The Australian stock market posted its biggest weekly gain since December. The ASX200 returned 1.89%. A rebound in technology stocks boosted the market on Friday, as well as energy stocks which also posted broad-based gains after oil prices climbed due to persistent supply concerns.
The Reserve Bank of Australia’s surprisingly dovish stance on Tuesday played a significant role in keeping the financial markets calm. Australia’s interest rates remain on hold at the historic low level of 0.10% despite soaring inflation figures and the rising cost of living. “Inflation has picked up more quickly than the RBA had expected, but remains lower than in many other countries” stated RBA Governor Dr Philip Lowe.
European stocks weakened. The European Central Bank (ECB) maintained key interest rates at record low levels- despite a record rise in eurozone’s inflation (5.1% in January)- and stuck to plans to reduce bond purchases this year. At a press conference following the ECB’s policy meeting, President Lagarde dropped the line used in December that a rate rise this year would be “unlikely”. Investors also weighed up fresh economic data out of the eurozone. GDP grew 0.3% in the final three months of 2021. Separately, Eurostat data showed that the unemployment rate dropped to 7.0% in the final month of 2021. Meanwhile, retail sales saw a month-on-month decline of 3% in December and Germany’s factory orders growth exceeded expectations in December.
In Poland, stock markets returns were negative for the week. The WIG 20 was lower by 0.42%. Poland’s gross domestic product (GDP) grew by 5.7% year on year in 2021, boosted by a resilient consumer sector and solid investment activity, after a 2.5% drop in 2020.
In Hungary, the BUX index was off 1.95%.
The shock from the Covid-19 crisis has had a significant impact on growth and public finances CEE sovereigns, but ratings have largely been resilient and the region’s economies are well- positioned for recovery, Fitch Ratings said on Thursday.
ING analysts renewed their view that there is a higher risk of inflation staying elevated across the CEE region than in the developed EU economies, as the labour markets remain tight and the expansionary fiscal stance overlaps second-round effects from energy prices.
REST OF EUROPE
In Russia, the Russian Trading System Index jumped 2.06% as prospects for a remake of the Cold War over Ukraine abated amid diplomatic efforts and pressure from Beijing not to disrupt the winter Olympic Games. In commodities, a series of agreements were confirmed on Friday (Feb. 4) including oil and gas deals, during a meeting between Russian President Vladimir Putin and his Chinese counterpart Xi Jinping in Beijing.
In the UK, London’s premier index FTSE 100 returned 0.67%. The Bank of England (BoE) raised its key Bank Rate by 25bps to 0.5%, as expected, in a bid to contain soaring inflation. BoE Governor Andrew Bailey said it was likely the central bank would need to raise rates again. It was the first back-to-back increase since 2004, pushing borrowing costs to the highest level in 2 years. Policymakers have now reached the threshold to begin reducing the Bank’s £875bln stock of gilt holdings.
In Switzerland, the stock market’s returns were positive for the week. The SMI was up 0.30%. However, the Alpine country’s consumer confidence index eased to -3.6 in the January from +3.5 in the backdrop of less positive economic outlook and rising inflationary pressures, results of a quarterly survey by the State Secretariat for Economic Affairs or SECO showed.
(Note: Trading between 30/01-03/02/2022)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) was marked by increases in prices in the leading share indices, similar to the trend in leading stock exchanges worldwide. The TA35 index increased this week by 0.7%, bringing year-to-date cumulative losses to 2.4%. The Bank of Israel released figures indicating that in November 2021, foreign investors acquired US$ 190 million net in shares.
Saudi Arabia’s stocks fell for the week. The TASI was off 0.30%. Saudi Arabia’s largest pharmacy retail chain, Al Nahdi Medical Co., this week kicked off the largest share sale in the oil-rich kingdom since Saudi Aramco went public in 2019. And Saudi digital security company Elm Co. drew $57 billion in institutional orders for its IPO this week, according to Bloomberg. JPMorgan and Citi seeing no signs of slowing demand for Middle East IPOs as investors in Europe and the U.S. have by contrast stayed on the sidelines during recent market turbulence.
In South Africa, the JSE rose 2.4%, its biggest weekly gain since late December. Next week, investors will closely monitor key economic releases including December mining and manufacturing figures, as well as a State Of The Nation address by President Cyril Ramaphosa on Feb. 10.
In Nigeria, stocks as measured by the NGX All-Share Index (ASI) returned 1.29% this week. At the close of market on Friday, the stock exchange market value stood at N25.48 trillion. The Nigerian equity market has started the year 2022 on a solid footing. The ASI in the month of January has gained 9.15% for the month starting at 42,716.44 basis points to ending at 46,624.67 basis points.
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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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