Stocks suffered sharp losses this week, particularly on Wall Street, as investors seek safety. Mounting concerns about slowing world growth, the economic implications of the war in Ukraine and tightening monetary policy continued to weigh on risk appetite. Inflation is everywhere and so are recession fears.
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Canadian markets generated a negative result for the week. The benchmark S&P/TSX Composite Index slumped 2.59%. On Monday, the index ended with a loss of 633.59 points or 3.07% at 19,999.69, a six-month low. On the economic front, data from Statistics Canada showed the total value of building permits in Canada fell 9.3% to C$ 11.7 billion in March, following an upwardly revised 24.6% surge to a record C$ 12.9 billion in the previous month.
Equities in the US recorded another week of losses, with the Nasdaq plummeting by 2.8%, the S&P 500 plunging by 2.4% and the Dow tumbling by 2.1%. Wednesday’s inflation data weighed the most on sentiment. The inflation rate rose 8.3% year over year versus consensus estimates of around 8.1%, triggering another wave of uncertainty and reinforcing worries the Federal Reserve would speed up tightening. Adding to woes, the University of Michigan’s sentiment index fell to 59.1 from 65.2 in April, hitting its lowest level in 13 years, indicating the steep toll that surging inflation was taking on Americans’ confidence in their finances.
In Brazil, stocks as measured by the Bovespa Index, returned 2%, the first positive weekly result since March. Reports that retail sales and service sector activity were better than expected boosted sentiment. The unemployment rate in Brazil stood at 11.1% in the first quarter of 2022, which is stable compared with the fourth quarter of 2021.But the accumulated inflation over 12 months is 12.13%, driven by food and fuel prices, according to the Brazilian Institute of Geography and Statistics (IBGE). To curb inflation, the government announced it would zero the import tax rate on seven categories of food products.
Japanese markets’ returns were negative for the week. The Nikkei hit a two-month low on Thursday. Bank of Japan Governor Haruhiko Kuroda reiterated the central bank’s commitment to its current monetary policy stance. Japan’s government agreed in principle on a ban of Russian oil imports with other Group of Seven (G-7) developed nations. The government also announced a strategic digital partnership with the EU.
In China, stocks were higher as the central bank reiterated pledges to maintain reasonably sufficient liquidity and stable credit growth in its first-quarter monetary policy report. In economic releases, consumer inflation rose at an above-expected 2.1% year-on-year rate mainly because of more expensive food and fuel. However, producer prices moderated to an annualized 8%. April exports rose 3.9% YoY. This was better than expected but still a two-year low. Imports were flat.
The Australian market finished in the red for a fourth week in a row. On the data front, the total number of building permits issued in Australia was down a seasonally adjusted 18.5% on month in March- coming in at 15,183. Meanwhile, the total value of retail sales was up a seasonally adjusted 1.6% on month in March coming in at A$33.626 billion, the Australian Bureau of Statistics said.
Despite highly volatile conditions, European stocks rebounded from earlier weakness to finish higher,
The pan-European STOXX Europe 600 Index was up 0.83%. Germany’s Xetra DAX Index jumped 2.59%, Italy’s FTSE MIB Index advanced 2.44%, and France’s CAC 40 Index climbed 1.67%. European Central Bank (ECB) President Christine Lagarde said that the ECB’s bond-buying program could end “early in the third quarter” and suggested a first interest rate hike would occur in July.
In Poland, the WIG20 ticked up 0.03% while in Hungary the BUX shrunk by 5.01%. Hungary’s new President Katalin Novak at her inauguration ceremony on Saturday said her first trip would take her to Poland, in an apparent gesture to mend relations with Warsaw. Hungary’s rejection of sending weapons shipments to neighbouring Ukraine and its opposition to a planned European Union embargo on Russian oil imports has weighed on relations between Budapest and Warsaw.
REST OF EUROPE
In the UK, the FTSE 100 moved up 0.41%. The economy grew 0.8% in the first quarter on weaker spending amid the rising cost of living, data released by the Office for National Statistics showed. In Russia, the RTS Index soared 4.06% in a holiday-shortened week. Russian markets were closed on Monday and Tuesday in observance of Victory Day. Russia imposed sanctions on European Union (EU) energy companies, including Gazprom Germania. Gazprom then said it would cut shipments to Europe via the Yamal pipeline, which runs through Poland to Germany. Earlier, Ukraine’s pipeline operator stopped flows through one of the two pipelines transporting Russian gas through the country to Europe.
Due to the “tech wreck” on Wall Street, Apple ($2.31 trillion in cap) lost its place as biggest global cap to Saudi Aramco ($2.4 trillion). The oil giant’s shareholders approved a 10% capital top-up through a bonus share distribution at 1-for-10, bringing its total of shares to 220 billion, from 200 billion. The stock’s closing price was adjusted to SAR 40.65 on May 12.
In South Africa, the JSE Top 40 bucked the global trend and gained 1.15%. The focus shifted to a monetary policy decision by the South African Reserve Bank that will be announced later next week, with markets anticipating a 50bps hike to 4.75%. In Nigeria, the local equities market maintained its bullish performance as the All-Share index gained 4.25% this week. This is following the 2.61% 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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Note: Next week World Markets Review will not be published due to holidays