United States
The major indexes finished mostly lower in the second week of light holiday trading, with the S&P 500 Index remaining above its intraday low from the previous week. Consumer staples and materials stocks fell the most, while consumer discretionary stocks held up well, thanks in part to the success of Target and other retailers. Southwest Airlines stock dropped sharply when trading opened on Tuesday due to a widely publicised wave of flight cancellations, but the airline recovered some ground as the week progressed. Bond trading ended early on Friday, and both the equity and bond markets were set to close on Monday for the New Year’s Day holiday.
The 10-year Treasury note yield rose this week, reaching its highest intraday level since November 14 on Friday morning. According to our traders, positive economic surprises appeared to push Treasury yields higher, though the prospect of faster economic growth in China also played a role. The broad tax-exempt bond market posted negative returns for most of the week as municipal bonds continued to see outflows, most likely reflecting investors’ year-end tax-loss harvesting.
During the short trading week, high-yield market volumes were lower than usual. Traders noticed that news about China relaxing COVID restrictions boosted commodity and energy names, though trading was still limited. Because the primary calendar for the year had already concluded, no new deals were announced. Participation in the leveraged loan market was also minimal, with only a slight increase on Wednesday before liquidity dried up.
Europe
During a week of light trading, European stocks fell. The pan-European STOXX Europe 600 Index fell 0.60% in local currency over the previous five trading days that ended December 30. The DAX Index in Germany fell slightly. Meanwhile, France’s CAC 40 Index fell 0.48%, and Italy’s FTSE MIB Index fell 0.71%.
According to a Nationwide mortgage provider survey, UK house prices fell for the fourth consecutive month in December as higher mortgage rates continued to weigh on the market. The monthly cost of a house decreased by 0.1%. Year on year, house price growth has slowed to 2.8% from 4.4% in November.
The number of UK workers striking or planning to strike for better pay and working conditions has increased, raising concerns that the Bank of England may raise interest rates over a more extended period to prevent inflation from becoming entrenched. Nurses, ambulance drivers, some doctors and teachers, rail and postal workers, airport baggage handlers, border security agents, highway workers, civil servants, bus drivers, firefighters, charity workers, and meteorologists are among those named on the list.
On the other hand, the Spanish government announced that it would be establishing a third financial aid package worth EUR 10 billion. This is to keep up with the increase in higher cost of living within households; this year, the government has provided aid amounting to 45 billion Euros
Japan
Japanese equities positively started the final week of 2022, with early gains amid light holiday trade. After falling to three-month lows on Thursday, the Nikkei 225 recovered some lost ground on Friday but ended the week down 0.54% and the year down 9.37%, its first annual loss in four years. The yen recovered late the week after the Bank of Japan announced a flurry of unscheduled bond purchases.
During the week, signs that US inflation may be slowing encouraged, as did remarks from Bank of Japan Governor Haruhiko Kuroda, who reiterated the central bank’s long-standing stance of easy monetary policy. China’s announcement on January 8 that it would eliminate quarantine requirements for international arrivals, seen as an essential first step toward reopening its borders, boosted sentiment.
The upbeat mood, however, quickly faded as ongoing concerns about the global economy, the possibility of a recession in the United States, and reports of rapidly spreading coronavirus infections in China all weighed on sentiment. Several countries, including Japan, immediately imposed new restrictions requiring COVID tests for Chinese passengers arriving in their countries.
China
Despite a surge in cases, Chinese stocks rose as Beijing relaxed coronavirus pandemic restrictions. The Shanghai Composite Index increased by 1.42%, while the blue-chip CSI 300 increased by 1.13%, reversing several weeks of losses.
The National Health Commission (NHC), China’s health regulator, has reduced coronavirus management from the highest to the second-highest level, effective January 8, 2023. While China will continue to prioritise vaccinations for the elderly, medical supply availability, and tiered medical treatment, the NHC announced in state-run media that it would lift almost all standard restrictions. Inbound travellers must now provide a negative COVID-19 test result 48 hours before departure, while outbound travel will resume in “an orderly manner.” The NHC also stated that it would no longer publish daily coronavirus statistics.”
Many countries have tightened entry requirements for travellers from China ahead of January’s reopening. The US, Japan, Taiwan, India, Malaysia, and Italy introduced COVID-19 testing on arrivals from China due to concerns about the severity of the virus and a lack of transparency from the Chinese government regarding the spread.
Economic activity increased in several Chinese cities where coronavirus cases appeared to be peaking. As residents resumed normal activities, the number of subway passengers in Beijing, Chongqing, Chengdu, and Wuhan increased by 40% to 100%. According to reports, traffic congestion, movie sales, and air travel have all increased in some areas.
China’s Ministry of Finance (MOF) announced it would boost fiscal expenditures next year to support economic growth. Government investment will play a bigger role in leading private investment, increasing consumption, and stabilising international trade and foreign investment. The MOF’s statement aligns with the guidance of targeted monetary policy and strengthened fiscal policy from the government’s Central Economic Work Conference earlier in December when officials said that reviving domestic demand was their top priority in 2023.
Market indices
|
| Weekly Index |
| YTD Index |
| ||
| Index | Local Currency | Sterling Pound | Local Currency | Sterling Pound | ||
| UK |
|
|
|
| ||
| FTSE 100 Index | 0.54% | 0.54% | 5.47% | 5.47% | ||
| US |
|
|
|
| ||
| S&P 500 Index | -0.12% | 0.14% | -18.51% | -8.25% | ||
| EU |
|
|
|
| ||
| Euro Stoxx 50 | -0.61% | 0.20% | -9.49% | -4.35% | ||
| Asia |
|
|
|
| ||
| Nikkei 225 Index | 0.20% | 1.15% | -8.70% | -10.59% | ||
| Hang Seng Index | -1.32% | -1.08% | -14.52% | -3.86% | ||
| MSCI Emerging Markets Index | 0.20% | 0.56% | -15.54% | -10.02% | ||
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