After a positive start to the year in markets, world equities were mixed this past week as investors grappled with worries that the world economy may be headed for a painful recession. The uncertainty regarding the ultimate impact on the economy and financial conditions of recent global monetary policy decisions to aggressively tighten policies weighed on markets.
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The major US indices ended mixed for the week with the narrowly focused Dow Jones Industrial Average
and S&P 500 posting their first weekly declines of the new year. Investors reacted to major quarterly earnings reports, big layoff announcements from major technology companies including Alphabet and Microsoft. Concern about the prospect of a recession also aggravated the sense of anxiety for investors as the week brought several additional signals that the economy was slowing significantly. U.S. retail sales data for December fell by 1.1% monthly, which was roughly triple consensus estimates, existing home sales fall for an eleventh-straight month and industrial production fell by 0.7% in December below estimates of down 0.1%. Partisan brinkmanship in Washington D.C. over the nation’s debt ceiling also appeared to weigh on sentiment.
Equities in Asia-Pacific were mostly higher. Sentiment was supported by the prospect of China’s reopening boosting the world economy. Chinese market rallied for a fourth consecutive week. China’s economy expanded 2.9% in the fourth quarter of 2022 (and 3.0% for the full year). The People’s Bank of China (PBOC) left its left its 1-year and 5-year Loan Prime Rates (LPR) unchanged for a fifth consecutive month, as widely expected. In Japan, stock markets rose over the week.Investors’ focus was on the Bank of Japan (BoJ) maintained its ultralow rates and left its YCC framework unchanged—as had been widely expected. The BoJ raised its forecasts for the core CPI for fiscal years 2022 and 2023. Japan’s core CPI rose 4% year on year in December, a 41-year high. In Australia, the S&P/ASX 200 added 16.9 points to 7452.2 on Friday, taking its weekly gain to 1.7%.
European markets weakened after European Central Bank (ECB) policymakers suggested that forthcoming rate hikes might be higher, reigniting fears of a prolonged economic slowdown. ECB President Christine Lagarde told a panel that markets should ditch their view that the central bank would soon slow down its rate rises in response to signs that euro-zone inflation has peaked. Bank of England (BoE) Governor Andrew Bailey said in a newspaper interview still expected a “long, but shallow” recession in the UK this year. Germany’s DAX Index lost 0.35%, France’s CAC 40 Index declined 0.39%, and the UK’s FTSE 100 Index was off 0.94%.
In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the third week of 2023 (15-19/01/2023) was marked by price increases in most of the leading share indices. The benchmark TA-35 index increased this week by 0.5%. This is according to the information contained in the weekly stock market report, released by the TASE. On the data front annual inflation in Israel was at 5.3% in December matching November’s reading, a 20-year record but belomarket forecasts of 5.4%
In Turkey, stocks as measured by the BIST-100 Index, returned about 10.1%. The central bank held its interest rate at 9%, as previously signaled, marking the end of its interest rate-cutting cycle. The decision was widely expected. Turkish President Recep Tayyip Erdogan called for the presidential and general elections to take place on May 14, 2023—about one month earlier than the final deadline.
In South Africa, the JSE lost ground on Friday, even as world stocks concluded a volatile week on a positive note. A day earlier, JSE CEO Leila Fourie told delegates at the World Economic Forum in Davos that SA is set to be one of the beneficiaries, as the global investment tide is turning in favour of emerging markets.
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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.
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