United States
Major benchmarks finished mostly higher, with the large-cap S&P 500 Index reaching its highest level since February towards the end of the week. Information technology stocks performed well, considering gains in Apple sales expectations. A continuous rise in commodity prices boosted the energy and materials sectors, while health care shares underperformed, being dragged down by a drop in drug giant Pfizer. Bloomberg reported last week that the S&P 500 had gained one-third of 1% in the last hour of trading for five consecutive days, which shows the longest streak in two years.
Concerns over the Federal Reserve’s stance weighed on equity sentiment early in the week, prompting a bond market sell-off. The Federal Reserve Chief reiterated that the central bank could deliver rate increases of more than 25 basis points (0.25 percentage points) at future meetings if policymakers control inflation.
Investors’ attention has been focused on what has been going on in Russia and Ukraine. Heavy fighting north of Kyiv and Ukrainian officials rejected a Russian demand that their forces in Mariupol surrender. While fears that Russia would use lower-yield nuclear weapons, traders noted that stocks regained some footing on Thursday after an adviser to Ukrainian President Volodymyr Zelenskyy hinted at talks of a cease-fire during the week.
The tone of the week’s economic data was mixed, with some data appearing to improve since the Russian invasion. Durable goods orders fell 2.2% in February, the first drop in five months. On Wednesday, stocks appeared to react negatively to news that February’s new home sales fell 2.0% despite a rise in inventories to their highest levels since 2008. Pending home sales fell 4.1% in February, defying expectations for a 1% increase.
Ten-year bond yields rose throughout the week considering the federal reserve action on key interest rates. Treasury note yields increased by 35 basis points within the week, highlighting a drop in the price of bonds. On the other hand, there was some volatility in the cooperate bond market caused by the Federal Reserve’s hawkish comments despite the primary market being strong.
In brief, the rise in yields has had a lesser impact on the bank loan markets as interest rates and coupon payments are positively related. The backdrop of loans has been positive as there was a healthy inflow of funds to both mutual funds and Exchange-traded funds (EFT) as investors anticipated a hike in interest rates.
Europe
Europe’s stock market fell because of the ongoing invasion of Ukraine and the prospect of a tighter monetary policy. The major indices showed a fall of the Dax at 0.74%, while the CAC 40 index in France fell by 1.01%. Yields in the eurozone rose, following a tighter monetary policy taken up by the US federal reserve. German ten-year bonds reached their highest level since 2018, with UK gilt yields ending on a higher note parallel to the YS treasuries.
The Russian invasion of Ukraine has slowed down business activity in Europe, as shown by the S&P global composite index declining. Prices and costs charged by firms rose as there were supply chain delays. Business confidence also dampened as there are various concerns about the economic outlook within the following quarters of the year and the ongoing Russia/Ukraine conflict.
As the most pressing issue in Europe continues, several western countries have offered to aid Ukraine from a military standpoint. The imposition of sanctions on Russian institutions has continued, with the Russian central bank being hindered to sell off its gold to strengthen its depreciated currency. The United States has also agreed to supply 15 billion cubic meters of liquified gas to mitigate the constraints that may have been caused by Russia’s endeavours.
UK
Considering the worsening economic outlook, the UK Chancellor of the Exchequer, Rishi Sunak, presented a mini-budget that preserved most of a GBP 50 billion public finance windfall with a cautionary tale. The Spring budget saw a reduction in fuel duty and national insurance contributions. There was also a preannounced reduction of basic income tax in 2024. Inflation in the UK hit a 30 year high this month, which put pressure on the Bank of England (BOE) to revise interest rates. The CPI rose to an annual rate of 6.2% due to soaring household bills, utilities, and petrol prices.
Russia
In the aftermath of volatile market conditions, the MOEX partially resumed operations last Thursday. With the invasion delayed by a month, compared to the Russian government’s prediction of a week, the attacks have caused widespread damage and displaced more than 3.5 million people according to the United Nations.
The United States announced that it would accept 100,000 Ukrainian refugees as the state has continued to announce more sanctions against Russian legislators and Russian defensive firms. This comes as the US president was scheduled to visit the polish President Andrzej Duda to discuss the displacement situation as Poland also shares a border with Ukraine.
japan
Over the week, stocks have risen, with the Nikkei 225 index performing well and the TOPIX following suit. Yields rose to bring down the price of bonds poised by the global sell-off of bonds, as major central banks also revised their interest rates. The Japanese yen depreciated against the US dollar at JYP121.58 from 119.23 owing to a more divergent monetary policy.
As pressures mount on Prime minister Fumio Kishida to mitigate the rise in prices of commodities, the government is set to roll out more stimuli to boost economic performance. Tokyo’s consumer price index rose in March from the beginning of the year, with inflation staying below the 2% target. The BOJ still has a dovish stance as inflation may be expected to rise amid rising prices of energy and commodities.
The rise in commodities and import costs have contributed to the yen’s further depreciation. The government stated that it will closely monitor foreign exchange movements and their impact on the economy. The governor restated that a depreciated currency is beneficial to their economy as it increases the value of overseas profits to domestic companies.
The drop in the Covid 19 cases and the easing in restrictions had no significant effect on the private sector as its activity fell in March. Severe supply chain bottlenecks along with an increase in the prices of raw materials signalled that price pressures were intensifying.
china
The delisting of the Chinese stocks on the US-listed Chinese companies was due to disputes over auditing standards. During the week, the shanghai composite along with the CSI 300 Index fell.
According to Reuters, Chinese regulators have instructed some of the country’s US-listed companies to gather audit documents. China’s top web search companies Baidu, E-commerce platforms Ali Baba and JD.com were among the companies that were involved. The regulator’s instruction indicated China’s willingness to succumb to Washington’s demands to resolve a long-running dispute. There was some uncertainty among the regulators on Thursday and it remains unclear whether China would allow US regulators to review audits of US-listed Chinese companies. The US has been demanding for years to access the books for the listed companies, but Beijing has refused, citing national security reasons.
In addition, risk appetite has been dampened by numerous reports of a worsening coronavirus outbreak on the mainland. Reports show that more than 56,000 cases have erupted nationwide since the beginning of March. Despite authorities tightening restrictions the number of infections on Friday increased to more than 60% in the financial district of Shanghai.
Markets for the week
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| In Local Currency | In Sterling Pound | ||
| Index | Last week | YTD | Last week | YTD |
| UK |
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| FTSE 100 Index | 0.94% | 2.21% | 0.94% | 2.21% |
| US |
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| S&P 500 Index | 1.61% | -2.14% | 1.61% | -2.14% |
| Europe |
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| Euro Stoxx 50 Index | -0.96% | -9.86% | -1.43% | -10.37% |
| Asia |
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| Nikkei 225 Index | 4.93% | -2.23% | 2.33% | -5.58% |
| Hang Seng Index | -0.03% | -8.20% | -0.27% | -6.14% |
| MSCI Emerging Markets Index | 1.30% | -6.29% | 1.16% | -4.90% |
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