world markets

World stocks under pressure as recession worries are picking up

From 04-08/04/2022

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World markets were rattled by hawkish language from the US Federal Reserve, concerns over inflation, and an unfavorable geopolitical background with NATO chief Jens Stoltenberg warning that the Ukraine conflict could last for years. Several US central bank members came out in favor of one or several 50bp hikes if inflation showed no signs of abating.  Investors worry that aggressive tightening could trigger a recession in the US. The situation in Ukraine also continued to loom large over sentiment.


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AMERICAS

CANADA

Canadian stock market returns were negative this week. The benchmark S&P/TSX Composite Index was down 0.36%. The Canadian economy added 72,500 jobs last month, following an addition of 336,600 jobs in February, data released by Statistics Canada showed. The addition in March was slightly less than forecasts. Meanwhile, the unemployment rate fell to 5.3% in March, from 5.5% in February. It was the lowest rate on record since comparable data became available in 1976.

US

US indices ended the period under review in negative territory.  For the week, the tech-rich Nasdaq plunged by 3.9%, the S&P 500 fell 1.3% and the Dow dropped 0.3%. Wednesday’s release of minutes from the Federal Reserve’s mid-March meeting laid out plans for a speedier policy tightening that could trigger a recession in the US.
The minutes also offered clues about the shrinking of the Fed’s almost $9 trillion bond holdings. Fed vice-chair Lael Brainard  said inflation was now a major problem that had to be tackled with gradual rate increases and strong measures to shrink the Fed’s balance sheet.

LATAM

Brazil’s Bovespa plunged 3%.The country recorded its highest inflation in 28 years in March, according to data from the Nationwide Consumer Price Index released this Friday by IBGE.
Prices rose 1.62%, following a 1.01% increase in February. The rate is only lower than in March 1994. Cumulative inflation in the last 12 months has reached 11.30%, the highest since October 2003.
In Chile, the IPSA lost 0.19%. President Gabriel Boric unveiled the government’s Inclusive Recovery Plan. As reported by Bloomberg, about USD 1.4 billion of the package is intended to help generate jobs, USD 1.3 billion would be used in direct transfers to households, and USD 1.0 billion is to help support small and medium-sized enterprises.

ASIA/PACIFIC

JAPAN

Japan’s equity market continued to fall.  The International Monetary Fund slashed Japan’s economic growth forecast for 2022 to 2.4% from its earlier estimate of 3.3%in January. “Escalation of the Ukraine conflict poses significant downside risks to the Japanese economy through commodity prices, financial and trade spillovers, supply-chain disruptions” and other factors, the IMF warned in a report.

The Tokyo stock market was reorganized Monday into three trading segments—prime, standard, and growth- in the first major reform in decades aimed at imposing stricter listing standards and attracting more foreign investment. The reform came as Japan tries to cement a foothold for its $6.5 trillion Tokyo stock market as an international financial hub.

CHINA

Chinese markets were lower as the ongoing lockdown in Shanghai curbed risk appetite and escalated concerns on future earnings amid an economic slowdown. Nomura has estimated that 193 million people are affected in areas that account for 13.5% of China’s economy. The Caixin/Markit services purchasing managers’ index (PMI) fell to 42 in March from 50.2 in February, its lowest level since Covid started, reflecting the latest toll on client demand. China announced a draft revision of confidentiality rules for Chinese companies listing overseas, removing a legal hurdle to Sino-U.S. cooperation on audit oversight.

AUSTRALIA

The Australian market generated negative returns this week with the ASX200 losing 0.21%. Tech, consumer discretionary stocks and miners took a hit as world markets fretted about the US Fed’s plan for aggressive policy tightening. Australia’s trade surplus fell to A$7.46 billion in February from A$11.79 billion in January, on higher imports, data from the Australian Bureau of Statistics showed. The expected level was A$12.0 billion.

EUROPE

EUROZONE

European stocks rose modestly amid concerns about central bank monetary tightening in the next few months and as European countries stepped up pressure on Russia. The European Commission decided to stop buying Russian coal and promised even more sanctions against Moscow.

The pan-European STOXX Europe 600 Index rose 0.57%. France’s CAC 40 Index plunged 2.04% on election uncertainty. French President Emmanuel Macron will face Marine Le Pen in a presidential run-off on April 24 after leading the first round on Sunday with 27.6% of the vote to Le Pen’s 23.0%, according to an Ipsos exit poll.

The minutes from the ECB’s March meeting revealed that patience in dealing with inflation was wearing thin. Many policymakers are now in favor of rapid tightening. On the data front, investor morale in the eurozone fell to its lowest level in nearly two years in April, according to a monthly survey conducted by Sentix and German factory orders fell sharply in February.

CEE

In Poland, the WIG20 shrunk by 3.68%. The war in Ukraine means a worsening of Poland’s economic outlook, an increase in inflation and possible stagflation. Capital Economics has revised its 2022 GDP forecast from 4.5% to 3.5%, below consensus expectations.

In Hungary, the BUX sank 6.31%. Hungary’s Prime Minister Viktor Orban won an overwhelming electoral victory last Sunday and this week, the EU initiated a rule of law procedure against Budapest, which might eventually result in Hungary losing access to disbursements from the EU budget.

Hungary is accommodating about 400,000 of the 4.3 million Ukrainian refugees displaced by the war, according to United Nations data.

REST OF EUROPE

In Russia, the RTS index surged 4.49%  despite a new set of Western sanctions over Moscow’s actions in Ukraine.  The new sanctions hit state-owned Sberbank, which holds one-third of Russia’s total banking assets, and the country’s largest private lender Alfa Bank. The Russian stock market is showing “miraculous resilience” to sanctions Finam brokerage said in a note.

In the UK, the FTSE index was higher by 1.75%. London has seen a major slowdown on its capital markets this year as the City feels the shocks of war. The London Stock Exchange saw 19 firms raise a total of £397m on its two markets between January and March, a stark fall from the same period in 2021 which saw 14 firms raise a combined £5.6bn, according to data from accountancy firm EY.

In Switzerland, the SMI jumped 2.70% this week as data showing a drop in Swiss unemployment rate aided sentiment. The jobless rate fell to a seasonally adjusted 2.2% in March, from 2.3% in February according to data released by the State Secretariat for Economic Affairs, or SECO.

MIDDLE EAST

(Note: Trading between 03-07/04/2022)

In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the first week of April was marked by price increases in the leading share indices, unlike the trend in stock exchanges worldwide.
The TA-35 increased this week by 0.7%,  bringing year-to-date cumulative gains to 2.9%. The Bank of Israel released figures indicating that foreign investors acquired US$ 315 million net in shares on the TASE in January 2022, following acquisitions of shares of about US$ 4 billion net for the whole of 2021.

In Saudi Arabia, stocks as measured by the TASI index returned 1.71% this week. Next week, on Monday (April 11) National Petrochemical Co.’s shares will be suspended from trading on the Saudi stock exchange to commence delisting procedures.

AFRICA

In South Africa, the JSE Top 40 index was lower by 1.72%. The SA government has opted to sell off South Africa’s strategic oil stocks to compensate for the revenue forfeited to provide a temporary drop in the fuel levy.

“The sale of the strategic stocks to raise R6 billion provides the government with the financial breathing room to offer a R1.50 per litre drop in the fuel price until May, it does, however, raise questions over the importance of strategic stocks and their role in security of fuel supply for the country, especially at a time when risks around global fuel supply are heightened” Fin24 reported.

In Nigeria, the NGS All Share Index was off 0.45%. At the close of market on Friday 8th April 2022, the stock exchange market value stood at N25.14 trillion. The stock market has advanced 3,914.92 base points since the start of the year.


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. April 8, 2022
“Weekly market wrap”. Edward Jones. April 8, 2022
“Weekly Market Recap”. John Hancock Investments. April 8, 2022
“Schwab Market Update”. Charles Schwab. April 8, 2022
“Market Analysis”. Edmond de Rothschild. April 8, 2022


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