world markets

Markets mostly higher but skyrocketing inflation haunts outlook

From 11-15 April 2022

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Trading this week was marked by the continuation of hostilities between Russia and Ukraine, for the sixth week, the continuation of the lockdown in several cities in China, monetary policy decisions and a flurry of comments from Fed officials. Meanwhile, commodity prices continued to rise and investors remain cautious about the ongoing impact of skyrocketing inflation. With a long holiday weekend ahead due to Easter, trading volumes were somewhat thin in many markets.


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AMERICAS

CANADA

Stocks as measured by the S&P/TSX Composite Index returned -0.09%. The Bank of Canada raised its target for the overnight rate by 50bps to 1% on Wednesday, matching market expectations. It was the second consecutive rate hike and the biggest in 20 years. “With inflation well above target, with the economy moving in excess demand, there is a need to normalize monetary policy relatively quickly,” Governor Tiff Macklem told reporters. On the economic front, manufacturing sales rose for the fifth straight month, jumping by 4.2% from a month earlier to C$ 67.7 billion in February, final data from Statistics Canada showed.

US

In a holiday-shortened week, the three major U.S. stock markets again generated negative returns. Investors digested two important inflation readings: The Consumer Price Index jumped to 8.5% in March, a 40-year high.  Meanwhile, the producer price index, which measures prices paid by domestic producers, came in at 11.2% year-over-year, the highest on record. Despite high inflation, U.S. retail sales rose by 0.5% in March.

First-quarter S&P 500 earnings season officially kicked off this week, with big banks and financial institutions in focus. JP Morgan’ s results showed a sharp slowdown in the investment banking business and much higher provisioning because of the global slowdown and worsening geopolitical risk.

LATAM

In Brazil, the Bovespa was off -2%. Gilson Finkelsztain, president of B3, the Brazilian Stock Exchange, when he was questioned during an interview with Veja magazine whether the movement of foreign investors entering the Brazilian stock market should last or is a matter of opportunism to buy cheap shares, he said in that the country is “very cheap” and, in recent years, “lost relevance even among the emerging countries”.

In economic news, the IPCA (National Consumer Price Index) advanced 5.2 percentage points in March in Brazil, compared to what was recorded in the previous 12-month period. In Chile, the IPSA was lower by 1.05%. Chile’s President Gabriel Boric proposed restricted pension withdrawals, citing inflation.

ASIA/PACIFIC

JAPAN

The major Japanese stock indices posted positive results. Bank of Japan (BoJ) Governor Haruhiko Kuroda asserted that Japan’s economy will continue to recover despite surging commodity prices.
But the BoJ’s ultra-loose policy stance has contributed to significant yen weakness. Finance Minister Shunichi Suzuki said on Wednesday that sharp currency moves were “very problematic” and warned against excessive yen declines.

On the data front, Japan’s PPI increased by 9.5% year on year in March, following a 9.7% rise in February. More positively, Japanese manufacturers’ business confidence improved for a second month in April, according to the Reuters Tankan poll.

CHINA

Chinese stocks retreated as a growing number of Chinese cities re-imposed restrictions and supply chain paralysis gripped parts of China’s manufacturing sector. In economic readings, China’s CPI inflation rose to 1.5% YoY in March, driven by increased fuel costs and a more gradual pace of deflation in food prices. PPI inflation eased to 8.3% YoY in March from 8.8% in February. March exports, in US dollar terms, rose a better-than-expected 14.7% in March from a year ago but imports fell 0.1% YoY, vs. an expected 8.4% gain.

AUSTRALIA

In Australia stocks as measured by the ASX200 returned 0.61%. The market posted a fourth weekly gain ahead of a long weekend due to Good Friday and Easter Monday holidays. The materials sector finished as one of this week’s leaders while flight stocks rose on strong Easter traffic at airports. Australia’s unemployment rate held at a 13-year low last month as jobs growth slowed after months of strong gains, official data showed.

EUROPE

EUROZONE

European markets were higher amid some relief that the European Central Bank (ECB) did not adopt a more hawkish stance at its policy meeting. The ECB decided to keep its rates on hold at 0.0% given the uncertainty posed to the European economy from the geopolitical crisis but confirmed it will end its bond buying in the third quarter. ECB President Christine Lagarde said that policymakers would “maintain optionality, gradualism, and flexibility in the conduct of our monetary policy.”

European markets also benefited from a drop in U.S. Treasury yields amid bets that U.S. inflation may have peaked. In politics, National Rally Party leader Marine Le Pen and President Emmanuel Macron beat other challengers in the first round of the French presidential election and will face each other in the second round on April 24.

CEE

In Hungary, the BUX advanced 1.92%. In economic releases,  Industrial production rose a working-day adjusted 4.5% year-on-year in February, following a 7.1% growth in January, final data from the Hungarian Central Statistical Office showed. Meanwhile, construction output grew 42.3% year-on-year in February, following a 3.3% increase in December.

In Poland, the WIG20 added 0.39%. The country has accepted large numbers of Ukrainian refugees. Poland’s Deputy Prime Minister Piotr Gliński who is responsible for overseeing Poland’s efforts to take in Ukrainian refugees, told Euractiv he expected that “in the near future we may still have to deal with the influx of refugees, although at a lower intensity than in the first days after the Russian invasion“.

REST OF EUROPE

In Russia, the RTS Index sank 11.53%. Moody’s Investors Service said Thursday that Russia “may be considered in default” if it does not pay two bonds in US dollars by end of a grace period on May 4. The decision came days after S&P Global Ratings declared Russia in “selective default” due to the failure to pay the bondholders in US currency.

In the UK, the FTSE 100 was off 0.69%. Inflation climbed to 7.0% in March from 6.2% in February,  the Office for National Statistics said Wednesday. The latest figure is the U.K.’s highest inflation number since March 1992. Traders are all but certain the Bank of England will raise its key interest rate by a quarter point to 1.0% in May.

In Switzerland, the SMI dropped 0.26%. Switzerland’s producer and import prices increased last month, rising by 6.1% year-on-year, data from the Federal Statistical Office showed. The producer price index rose 4.1% annually in March while import prices increased 10.2%.

MIDDLE EAST

(Note: Trading between 10-14/04/2022)

In Israel, the TA-35 index increased this week by 0.3%, bringing year-to-date cumulative gains to 3.1%. The Bank of Israel raised the interest rate for the first time since November 2018, by a quarter of a percent, from the historic low of 0.1% for the last two years to 0.35% with the aim of slowing down the rate of inflation. The Bank of Israel has also published an updated macroeconomic forecast, according to which: GDP is expected to grow by 5.5% and 4.0% in 2022 and 2023, respectively. The inflation rate is expected to stand at 3.6% and 2.0% in the years 2022 and 2023, respectively.

In Saudi Arabia, the TASI jumped 2.31%. Saudi Arabia’s stock exchange will launch single-stock futures trading in this quarter as the Kingdom seeks to boost attractiveness of its capital markets and spur foreign investment,  Mohammed Al-Rumaih, CEO of the bourse, told Argaam.

AFRICA

In South Africa, the JSE Top 40 was lower by 1.87%. In commodities, The South African Petroleum Industry Association (SAPIA) said in a statement on Friday that there is adequate petroleum product availability in the country following the recent floods in KZN. In currencies, the strong rand cushioned SA wheat prices from global extremes, FIN24 reported.

In Nigeria, the NSX All Share Index returned 1.99%. At the close of market on Thursday, the stock exchange market value stood at N25.61 trillion at the end of the trading day. The stock market has advanced 4,793.94 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 14, 2022
“Weekly market wrap”. Edward Jones. April 14, 2022
“Weekly Market Recap”. John Hancock Investments. April 14, 2022
“Schwab Market Update”. Charles Schwab. April 14, 2022
“Market Analysis”. Edmond de Rothschild. April 14, 2022


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