Uncertainty and volatility returned to world markets which continued to wrestle with the uncertainty regarding how long central banks will remain in monetary policy tightening mode. Geopolitical tensions between the U.S. and China remained heightened in the wake of the U.S. downing what was believed to be a Chinese high-altitude balloon that was floating over U.S. soil. The balloon, which China said is for meteorological purposes but the US insists has been spying, could be seen on television collapsing and falling from the sky. In the Middle East, powerful earthquakes stroke Turkey and Syria where more than 33000 people have been killed and tens of thousands injured. Turkey’s stock exchange on Wednesday suspended trading of equities for the first time in 24 years.
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AMERICAS
US major indices posted solid losses for the week as US monetary policy took Wall Street lower. The Dow Jones edged down by 0.2%, the S&P 500 slumped by 1.1%, its worst week of the year thus far, while the tech-heavy Nasdaq posted a steeper decline of 2.4%. Federal Reserve Chair Jerome Powell, in a question-and-answer session at the Economic Club of Washington said the disinflation process had started in the US, boosting hopes for an economic soft landing. His comments came after a week highlighted by an unexpectedly strong jobs report and yet another Fed rate hike. A series of apparently hawkish comments from other Fed officials the following day seemed to send stocks back lower as the officials sees rate hikes continuing as needed. Meanwhile, the US central bank’s quarterly survey of bank lending showed companies were facing tougher conditions, mortgage demand had fallen and demand for consumer loans was also down.
In Brazil, stocks as measured by the Bovespa Index, returned about -0.30%. Retail sales dropped 2.6% in volume in December. The central bank of Brazil left its key Selic rate steady at 13.75% for the fourth consecutive meeting in February 2023, in line with market expectations. Brazilian President Luiz Inacio Lula da Silva said on Monday (Feb. 6) there was “no explanation” for the country’s high interest rates.
ASIA
Japanese stock markets rose over the week, with the Nikkei 225 Index gaining 0.59%. With incumbent Bank of Japan Governor Haruhiko Kuroda’s term ending in April, investors are watching for any potential change in the central bank’s ultra-loose monetary policy stance. Japan’s government is likely to appoint academic Kazuo Ueda as the next Bank of Japan governor, the Nikkei Asia reported on Friday after market close, a surprise choice that could see the country align with other major economies in raising interest rates.
In China, equities weakened as a diplomatic crisis over a Chinese balloon in U.S. airspace reminded investors of geopolitical risks. Beijing stood by its assertions the device was a weather balloon as the U.S. government increasingly raised alarm of espionage by China. US President Biden said US-China relations had not been weakened by the balloon incident but the crisis raised the prospect of further sanctions on China from the U.S. On the data front, China’s January PPI was down 0.8% due to lower commodity costs while CPI rose 2.1% in line with estimates. In other news, China and Australia are discussing a pathway to full resumption of trade.
EUROPE
Europe stocks retreated on concerns about higher interest rates, as several European Central Bank (ECB) policymakers reasserted their hawkish stance. Eurozone’s December retail sales dropped 2.7% in volume while an ECB survey showed consumers expect purchasing power to decline more this year amid a 1% rise in nominal revenues and 5% inflation. Germany’s industrial orders increased by 3.2% in December—the biggest increase in more than year—thanks to strong domestic and eurozone demand. In the UK, GDP flatlined in December, but the country still avoided a recession. This was an improvement on November, where the figure was -0.3%, but left the UK as the only G7 economy yet to full recover its GDP level pre-Covid. The Bank of England’s Catherine Mann also said she was in favour of higher benchmark rates to stifle inflation.
MIDDLE EAST
In Israel, trading in the Tel Aviv Stock Exchange (TASE) this week (Feb. 5-9) was marked by price decreases in the leading share indices, similar to the trend in most of the leading stock exchanges worldwide. The benchmark TA-35 decreased this week by 2.9%. The trend of trading on the TASE was influenced by disagreements over the impact of the planned legal reform on the Israeli economy and on the activity of foreign investors in Israel. This is according to the information contained in the weekly stock market report, released by the TASE.
In Turkey, the Borsa Istanbul 100 index suspended trading on Wednesday (Feb.8) for the first time in 24 years after plunging more than 7% to below the 4510 level The index entered bear-market territory a day earlier and has returned about -16.2% on the week, following a major earthquake that hit Turkey and Syria on Monday. The number of deaths in Turkey rose to 24,617 on Sunday (Feb. 12), while more than 4,500 people have died in Syria, according to Reuters.
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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. Feb.10, 2023
“Weekly market wrap”. Feb. 10, 2023
“Weekly Market Recap”. John Hancock Investments. Feb. 10, 2023
“Schwab Market Update”. Charles Schwab. Feb. 10, 2023
“Market Analysis” Edmond de Rothschild. Feb. 10, 2023
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