While fighting continued in Ukraine, world markets firmed supported by multiple factors. The U.S. Federal Reserve raised interest rates for the first time since 2018, Russia avoided defaulting on its sovereign debt, and Chinese leader Xi Jinping assured U.S. President Joe Biden on Friday that he didn’t want war in Ukraine, (but that he doesn’t approve of sanctions, either). Despite lack of tangible progress in peace talks between Ukraine and Russia, risk appetite returned.
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Canadian stock markets returns were positive this week with the benchmark S&P/TSX Composite Index gaining 1.66%. Investors kept an eye on the developments in Ukraine but also digested the latest batch of economic data from Canada and the U.S. Canada’s annual inflation rate accelerated to 5.7% last month, the highest since August of 1991, slightly above market expectations of 5.5%, data from Statistics Canada showed.
Stock indices were higher, recovering all the ground lost in the preceding two weekly declines. For the week, the S&P 500 and the Dow Jones spiked by 5.5% and 5.4%, respectively while the Nasdaq soared by 8.1%. It was their strongest weekly result since November 2020. Traders digested the Fed’s mid-week monetary policy decision, falling unemployment rates and better industrial production and housing starts data.
The Fed raised the target for the fed funds rate by a quarter-point to 0.25%-0.5%, in line with market expectations. Policymakers indicated they’re inclined to raise rates at each of their six remaining policy meetings scheduled through the end of 2022.
Fed Chair Jerome Powell’s post-FOMC comments reassured markets the US economy was strong enough to cope. HedgeEye research team sees the US economy on the precipice of a slowdown. We see “massive bubbles within the bubble” across assets like crypto, NFTs, TAM Tech stocks and the private market, the team wrote.
In Brazil, stocks as measured by the BOVESPA returned 3%, having the second-best week of the year. The benchmark resumed the 115,000 points as commodities stocks and NY contributed to the upward movement. Brazil’s central bank on Wednesday raised interest rates by 100 basis points, to 11.75%. The country’s economy shrunk by 0.99% in January, according to the Index of Economic Activity (IBC-Br) published by the Central Bank (BC). In Mexico, the IPC was higher by 4.06%.
Japanese equity markets registered five consecutive days of gains. The Bank of Japan (BoJ) on Friday announced its decision to hold steady on monetary policy. In a largely expected decision, the central bank kept its interest rate targets unchanged. The BoJ warned of fresh risks from the Ukraine crisis, which it said was destabilising financial markets and sharply pushing up raw material costs. Japanese core consumer prices rose an annual 0.6% last month as energy costs surged at the fastest pace in 41 years due to higher oil prices, government data showed. The national CPI grew 0.9 percent year-on-year.
Mainland Chinese markets weakened during the week but the tone at the end of the week was positive after authorities ignited cautious hopes for more concrete stimulus. Among other things, Chinese officials including President Xi Jinping’s economic czar, Vice Premier Liu He, said they would introduce market-friendly policies and keep the capital market running smoothly, according to China’s state news agency Xinhua.
In Hong Kong, stocks slipped on Friday but still finished a rollercoaster week more than 4% higher. The city also welcomed its first SPAC on Friday, with Aquila Acquisition making its debut as the bourse talked up what it calls “a new route to market”.
The ASX 200 had its best weekly performance since February last year, with the benchmark returning 3.27%. The energy sector provided a big boost on Friday, as oil prices begun climbing again on doubts over the Russia-Ukraine peace talks. But it was the tech sector that did the heavy lifting for the week. Australia’s unemployment rate fell to 4%in February compared with 4.2% in January. That’s the lowest rate since August 2008, the Australian Bureau of Statistics (ABS) said.
European markets gained ground for a second consecutive week. The pan-European Stoxx 600 closed the week up 5.43%, registering its best weekly performance since the week through to Nov. 6, 2020. Germany’s DAX Index climbed 5.76%, France’s CAC 40 Index soared 5.75%, and Italy’s FTSE MIB Index rose 5.13%. In economic news, data from Eurostat showed the eurozone trade deficit narrowed in January to EUR 7.7 billion from EUR 9.7 billion in December. In a speech to the annual “The ECB and Its Watchers” conference, European Central Bank President Christine Lagarde warned that the Ukraine conflict could trigger “new inflationary trends.”
Central European markets were higher on the week. Poland’s WIG20 jumped 3.23%. In Hungary, the BUX was up 2.40%. Investors are eyeing a central bank meeting in Hungary next Tuesday where a Reuters poll of analysts expects a rate hike of 75 basis points to 4.15%. “We expect the NBH to continue to see risks to the inflation outlook as skewed to the upside due to the elevated uncertainty about the geopolitical situation and thus to signal that it intends to continue the tightening cycle on a monthly basis,” Morgan Stanley wrote in a note.
REST OF EUROPE
In Russia, Moscow’s stock exchange remained closed during the week of March 18. Russia avoided a debt default by making a bond interest payment Thursday night. Russian bonds rallied on Friday.
In the UK, the FTSE 100 jumped 3.48%. The Bank of England (BoE) raised its key Bank Rate by 25bps to 0.75%, in line with expectations. It is the third consecutive rise in borrowing costs, taking interest rates back to pre-Covid levels. Despite the hike, the decision was significantly more dovish than that seen in February. The BoE now believes that “some further modest tightening…may be appropriate in coming months.”
In Switzerland, the benchmark SMI, extended its gains to a sixth session on Friday. For the week it rallied 6.00%.
(Note: Trading between 13-17/03/2022 unless stated otherwise)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the third and shortened week of March was marked by a mixed trend in the leading share indices. The third week in March is a shortened trading week, given the Purim holiday, which begun on Thursday. The TA-35 index increased by 1.6% bringing year-to-date cumulative losses to 0.9%. This is according to the information contained in the weekly stock market report, released by TASE.
On the macro front, Israel’s growth rate stood at 8.2% last year, the highest since 2000, while the Consumer Price Index (CPI) increased by 0.7% in February 2022 data showed.
In Saudi Arabia, stocks as measured by the TASI index returned 1.30%. Elevated oil prices, a key catalyst for the Gulf’s financial markets have led benchmark indices of oil and gas-rich countries like Saudi Arabia and Qatar to be among the top 10 performers in the world this year, according to Bloomberg.
In South Africa, the JSE’s Top 40 gained 1.40%. South Africans don’t need to panic about any impending food shortages in the wake of Ukraine war because there are currently enough supplies locally, including of imports, the government said in a statement on Saturday.
In Nigeria, the markets generated a negative return for the week with the All Share Index falling 0.33%. At the close of market on Friday the stock exchange market value currently stood at N25.48 trillion at the end of the trading day.
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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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