World markets wrapped up another turbulent week with more losses. Worries about dramatically slowing growth, rising interest rates, the ongoing war in Ukraine and stringent sanctions against Russia, including an embargo on Russian oil, all contributed as well to the bearish sentiment. Meanwhile, China grapples with ongoing lockdowns and the prevailing economic storm these entail, further striking global inflationary pressures.
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Canadian equities, like their U.S. counterparts were lower this week. Investors digested the release of monthly employment data from both sides of the border. Statistics Canada showed Canadian employment was little changed in April after two consecutive months of growth. The report also showed the unemployment rate in Canada fell to 5.2% in April from 5.3% in March, in line with market expectations.
Most of the major US benchmarks fell for the fifth week in a row amid an increasing fear that the US Federal Reserve is going to topple the economy into recession. The central bank announced its latest policy moves, raising the target for the fed funds rate by half a point to 0.75%-1%, the second consecutive rate hike and the biggest rise in borrowing costs since 2000, aiming to tackle raging inflation. The Fed also said it would begin reducing its balance sheet in June.
Fed Chair Jerome Powell’s press conference on Wednesday surprised many as he stated that a hike of 75 basis points (0.75 percentage point) was “not something we are actively considering.” Friday’s solid US labour market report, including another month of solid job gains, failed to lift the market mood, with investors fixated once more on the Fed.
Headline nonfarm payrolls rose by 428k in April, an impressive number by anyone’s standards, and modestly above the consensus estimate of 380k. Worries were also aggravated by labour costs rising to record levels and a fall in the ISM from 57 to 55.
Brazilian stocks as measured by the BOVESPA index returned -3%, the fifth consecutive weekly decline. The benchmark tracked a generally negative mood as investors weigh high inflation, tight monetary policy and prospects of slow growth. Brazil’s central bank raised the Selic rate to 12.75% on Wednesday. extending one of the world’s most aggressive tightening cycles since Covid struck. So far, policymakers have increased borrowing costs by 10.75 percentage points since March 2021.
In Mexico, stock markets returns were negative. The IPC shrunk by 3.65%. Looking back, over the last four weeks, the IPC Mexico lost 10.97% while over the last 12 months, its price fell by 0.07%.
Equity markets were only open on Monday and Friday due to the Golden Week holidays. In a holiday-shortened week the NIKKEI 225 returned 0.58% despite the volatility induced by the Fed’s decision. On the economic front, core consumer prices in Tokyo increased 1.9% in April from a year earlier, the fastest pace in over seven years, government data showed. Koya Miyamae, a senior economist at SMBC Nikko Securities Inc., told Kyodo News the nationwide CPI for April, set for release on May 20, is also expected to reach around 2%, but the current increasing prices are unlikely to affect the Bank Of Japan’s ultraeasy monetary policy.
Chinese markets fell as President Xi Jinping said that the government would “resolutely adhere to” the zero-Covid policy. China’s manufacturing and service activity dropped in last month as widespread lockdowns continued to disrupt industrial activities and consumption: manufacturing PMI was 47.4 vs 49.5 in March and non-manufacturing PMI down to 41.9 vs. 48.4 previously. People’s Bank of China said it would use incremental policy tools to support steady economic growth and stabilize employment and prices
Australian markets were down with the ASX plunging 3.12%. All sectors were down for the week – led by tech stocks and the property sector which has been hit hard by rising interest rates. The Reserve Bank of Australia drastically raised inflation forecasts. The cost of petrol and higher prices for new homes will drive inflation to 6% by the end of the year, the Bank said. It’s not until December next year that the central bank expects wages to overtake inflation, according to its latest statement on monetary policy. The RBA also said it will need to raise interest rates further as inflation could exceed its expectations this year.
European stock markets were in negative territory as the Ukraine conflict added to the uncertainty and inflation remained higher. France’s CAC 40 Index ended 4.22% lower, Germany’s DAX Index lost 3.00%, and Italy’s FTSE MIB Index dropped 3.20%. In economic releases, German industrial output slumped 3.9% month-on-month in March, much bigger than the economists’ forecast of -1%.
Eurozone’s economic sentiment indicator (ESI) fell for a second consecutive month to 105 in April of 2022, the lowest reading since March of 2021, and below market forecasts of 108. A fresh wave of sanctions against Russia is likely to prolong the situation. The EU Commission proposed changes to the sixth package of sanctions announced on Wednesday, allowing states that are more dependent on Russian oil to have additional time in phasing out their imports.
In Poland, the WIG 20 sank 5%. Poland’s central bank raised its key interest rate by 75 basis points from 4.50% to 5.25% Policymakers signaled that rates are likely to rise further in the coming meetings, but noted that the bank’s guidance may change due to uncertain economic conditions amid the war in Ukraine. Poland has accommodated about 3.1 million of the 5.7 million refugees that have left Ukraine, according to United Nations data.
REST OF EUROPE
In the UK, the FTSE 100 plunged 2.08%. The Bank of England raised the key Bank Rate by 25bps to 1%, which is the 4th consecutive rate hike, pushing borrowing costs to the highest since early 2009. The bank also cut its forecast for economic growth and warned of a potential recession.
In Russia, the RTS Index ended a shortened week 0.60% higher. But the MOEX fell 2.13%pressured by the possibility of extended contraction of the Russian economy as more sanctions are looming.
In Switzerland, the SMI shrunk by 3.28% on weak global cues. The unemployment rate remained unchanged in April, coming in at a seasonally adjusted 2.2%, same as seen in March, data released by the State Secretariat for Economic Affairs showed. This was in line with economists’ forecast.
In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the last two weeks of April, including 4 shortened trading days due to the Intermediate Days of the Passover Festival, was marked by price decreases in most of the leading share indices. The TA-35 index decreased in the last two weeks by 1.1%. This is according to the information contained in the stock market report, released by the TASE. On the economic front, the Consumer Price Index (CPI) increased by 0.6% in March 2022, bringing the total increase for the first quarter of 2022 to about 1.5%. In total for the year beginning April 2021 and ending in March 2022, the CPI index rose by about 3.5%, data released by the CBS showed.
South African stocks suffered their worst week since 2020, according to Bloomberg. Johannesburg’s benchmark FTSE/JSE Africa All Share Index ended Friday down 2.5%, deepening this week’s selloff beyond 6%. That’s a steeper retreat than MSCI’s index of developing country stocks, which is down about 4%. More positively, the Johannesburg Stock Exchange (JSE) announced that the Financial Sector Conduct Authority (FSCA) has approved amendments to the JSE listings requirements, which will reduce red tape and create an enabling environment for companies listed on the bourse.
The Nigerian equities market bucked the global trend and maintained its bullish performance during the week, The All-Share index gained 2.61%. This is following the 2.43% growth recorded in the previous week.
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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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