World markets recovered this week as US job growth came in much stronger than expected and talk of Chinese stimulus measures boosted sentiment. Investors shrugged off concerns that persisting inflation that is driving aggressive monetary policy tightening in the Americas and Europe could result in a recession.
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AMERICAS
It was a good holiday-shortened week on Wall Street (markets were closed Monday in observance of Independence Day). U.S. stocks posted gains, canceling out the previous week’s losses and pulling the S&P 500 Index out of bear market territory. The Nasdaq spiked by 4.6%, the S&P 500 jumped by 1.9% and the Dow climbed by 0.8% amid optimism that the Federal Reserve will be able to curb inflation without tipping the economy into a recession. U.S. Federal Reserve Governor Christopher Waller and St. Louis Fed President James Bullard both backed another big interest rate increase in July but downplayed recessionary fears.
Furthermore, macroeconomic data improved. The release of a closely watched Labor Department showed stronger than expected U.S. job growth in the month of June. Nonfarm payrolls rose by 372,000 jobs month-over-month, well above consensus expectations of around 270,000. The report also showed the unemployment remained at 3.6% for the fourth month in a row.
ASIA/PACIFIC
Japan’s stock markets also gained during the week. Beijing’s decision to lift lockdowns was good news for Japanese equities but Chinese stocks eased as elevated geopolitical tensions hurt sentiment. Japan’s former Prime Minister Shinzo Abe was shot and killed during a campaign event in western Japan’s Nara city. Sino-U.S. tensions heated up after a senior Chinese military officer warned a top U.S. general that any “arbitrary provocations” would be met with a “firm counterstrike” by China.
In other news, Japan’s Government Pension Investment Fund is to start investing in Japanese startups, Nikkei reported. Meanwhile, China’s Ministry of Finance was considering new infrastructure stimulus via allowing local governments to sell 1.5 trillion yuan (USD 220 billion) of special bonds this year, according to Bloomberg.
Australia’s stock market had its best week since March. Major iron ore miners were buoyed by Chinese stimulus news.
EUROPE
European equities were higher in the first week of July as confidence returned despite a plethora of headwinds. The pan-European STOXX Europe 600 Index jumped 2.45%. Boris Johnson announced his intention to resign as British prime minister, after more than 50 ministers and several Cabinet members stepped down. The just-released minutes of the European Central Bank’s June meeting suggest that the door to a rate hike bigger than 25 basis points at the upcoming meeting on 21 July is still open.
The minutes also clarified that “gradualism” in tightening monetary policy does not rule out larger increases in rates and ECB policymakers expected growth “over the next few quarters would be weak and the risk of a technical recession needed to be borne in mind”. On the data front, Germany posted a foreign trade deficit of 1 billion euros in May—the first since 1991—as exports fell unexpectedly. The latest data comes at a time when more and more economists are talking of a recession in Europe within the next 12 months.
MIDDLE EAST
In Israel, trading on the Tel Aviv Stock Exchange was affected by the raising of interest rates by the Bank of Israel, for the third time in a row this year, by 0.5% to 1.25%, the most since March 2011 and pushing borrowing costs to the highest since 2013. The central bank also published an updated macroeconomic forecast, according to which: GDP is expected to grow by 5.0% and 3.5% in 2022 and 2023, respectively. In addition, following the government’s announcement of its dissolution, the date of the Knesset elections is set for November 1, 2022. This is according to the information contained in the weekly stock market report, released by the TASE.
AFRICA
In Nigeria, the All-Share Index declined by 0.53% in the week ended 8th July 2022. This is following the 0.24% growth recorded in the previous week. This brings the month-to-date performance of the Nigerian stock market to 0.50% and a year-to-date gain of 20.70%.
In South Africa, stocks generated positive returns but the rand reached a 20-month low this week with more analysts thinking the worst is yet to come, especially if the US goes into recession. Further interest rate hikes by the SA Reserve Bank might help the rand recover, but it’s a balancing act, Bloomberg reported.
In other news, Fitch Ratings has downgraded Namibia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BB-‘ from ‘BB’. The Outlook is Stable.
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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 holds 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. July 8, 2022
“Weekly market wrap”. Edward Jones. July 8, 2022
“Weekly Market Recap”. John Hancock Investments. July 8, 2022
“Schwab Market Update”. Charles Schwab. July 8, 2022
“Market Analysis”. Edmond de Rothschild. July 8, 2022
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