world markets

World equities bounce back as rate bets cool

From 23-27/05/2022

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Trading in the world markets in the fourth week in May took place against the backdrop of the continued hostilities between Russia and Ukraine and the continuation of lockdowns in China but stocks bounced back on hopes the US Federal Reserve can soon pause rate hikes.


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AMERICAS

CANADA

Canadian stocks as measured by the benchmark S&P/TSX Composite Index returned 2.73% this week.
On Friday, the market ended on a firm note, extending its winning streak to a sixth session. Easing concerns about interest rate hikes and data showing a slowdown in U.S. core consumer price growth -the US Fed’s preferred measure of inflation- slowed in April from March, helped underpin sentiment. Market-based inflation expectations have declined from their peak.

US

After seven consecutive weeks of declines, the large-cap S&P 500 Index and the tech-rich Nasdaq Composite Index gained ground. Wednesday’s release of minutes from the early-May meeting of the Federal Open Market Committee contained few surprises, showing that policymakers were voicing support for 50-basis-point rate increases over the next few meetings. The latest economic data were mixed. Consumer spending in the world’s largest economy remains solid despite inflation but a government report released on Friday indicated that much of that spending is coming at the expense of Americans’ savings. The personal saving rate fell to 4.4%, the lowest level since 2008.

LATAM

In Brazil, stock market returns were positive with the Bovespa Index returning 3%. During the week, Brazil’s Institute of Geography and Statistics, or IBGE, reported that the country’s inflation rate fell in the month through mid-May after electric rates declined. Consumer prices rose 0.59% from April 16 through May 15 and rose 12.20% from a year earlier.

ASIA/PACIFIC

JAPAN

Japanese equities climbed despite a survey showing activity in the country’s manufacturing sector grew at the slowest pace in three months in May amid supply bottlenecks. Optimistic retail earnings outlooks and waning concerns about overly aggressive interest rate hikes by the U.S. Federal Reserve put investors in a buying mood.

CHINA

Chinese markets were lower as China’s industrial groups posted their worst decline in profits in two years in April. Industrial profits fell 8.5% in April from a year earlier, data from the National Bureau of Statistics showed Friday. Meanwhile, Shanghai gradually eases lockdown restrictions, but economic concerns persist. Premier Li Keqiang held a rare video call with thousands of government officials in which he reportedly warned of dire consequences for China’s economy if they didn’t take measures to reverse the slowdown, Bloomberg reported.

AUSTRALIA

The S&P/ASX 200 advanced 0.52% posting gains for a second week in a row. A record retail spend locally ensured another buoyant session for investors. The Australian Bureau of Statistics (ABS) reported that retail trade rose by 0.9 per cent in April after rising 1.6 per cent in March, rising 1.8 per cent in February and after lifting by 1.6 per cent in January. Retail trade was up by 9.6 per cent on a year ago to a record $33.9 billion.

EUROPE

EUROZONE

European stock markets generated positive returns. Market volumes were light, however, due to holidays. The pan-European STOXX Europe 600 Index ended the week 2.98% higher.  European Central Bank President Christine Lagarde said eurozone interest rates will likely be in positive territory by the end of the third quarter. “I expect net purchases under the asset purchase program to end very early in the third quarter,” she wrote in a blog post. “This would allow us a rate lift-off at our meeting in July, in line with our forward guidance. Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter.”

CEE

In Poland, the WIG 20 grew 1.57% while Hungary’s BUX sank 7.50%. Hungarian markets assessed the impact of new windfall taxes worth 800 billion forints ($2.19 billion) on “extra profits” earned by banks, energy companies and other firms. The taxes aim to help reduce the budget deficit this year and next, according to the Hungarian government. Some 60% of the deficit adjustment will come from spending cuts while the new taxes will make up the rest.

REST OF EUROPE

In the UK, the FTSE 100 jumped 2.73%.  Investors were assessing the likely impact of a 25% windfall tax on oil and gas producer’s profits. Chancellor of the Exchequer Rishi Sunak, who announced the measure on Thursday, did not rule out applying a similar levy to power generators, but said more work needs to be done on the idea. Meanwhile, the Bank of England (BoE) Chief Economist Huw Pill told Welsh newspaper The Western Mail that he thought more interest rate increases would be needed to curb inflation in the UK but that too much tightening may run the risk of a deep recession.

MIDDLE EAST

(Note: Trading between 22-26/05/2022)

Trading in the Tel Aviv Stock Exchange (TASE) was marked by a mix trend in the leading share indices. The TA-35 index increased this week by 0.2%. This is according to the information contained in the stock market report, released by the TASE. On the monetary policy front, the Bank of Israel increased the interest rate in the economy on Monday for the second time this year, by 0.4% to the level of 0.75%, and subsequently there were price decreases on the TASE.

AFRICA

Equities in South Africa as measured by the JSE Top 40 index returned 4.73%. In Nigeria, the NGX All Share Index rallied and posted gains of 2.09% for the week. The stock market continued its bullish stance on the back of increased local participation and strong earning report for the first quarter of the year 2022.


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. May 27, 2022
“Weekly market wrap”. Edward Jones. May 27, 2022
“Weekly Market Recap”. John Hancock Investments. May 27, 2022
“Schwab Market Update”. Charles Schwab. May 27, 2022


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