Markets last week 31/01/2022

tHE u.s.

Last week began with one of the single most turbulent days witnessed across the equity markets. Especially on the Nasdaq which saw a 5% fall before midday and ended the session 0.6% up.

As corporate earnings kicked off, companies started publishing their Q4 2021 results which helped large-cap benchmarks move in positive territory. The highlight of the earnings season was Apple which climbed 7% on Friday alone in the largest single session gain since July 2020. This resulted in the S&P 500 climbing back up to close the day at a positive after dropping 4%. The overall market movements in S&P 500 reached a 10% correction from its December highs. Historically we have seen at any point in a year one to three corrections within the range of 5% to 15%.

Overall, investors expect more rate increases and believe that the Federal Reserve might be “behind the curve” to tame inflationary pressures, and that they need to raise short term interest rates quickly. After the Fed meeting during the week, they promised to not increase interest rates yet, but Fed Chair Jerome Powell left the possibility to raise rates later in 2022 with the first likely increase in March.

United Kingdom

The Bank of England plans to increase interest rates with the same intention as the Fed, to taper inflationary pressures. It will press ahead with its tightening cycle next month as inflation runs well ahead of target and the economic threat from the Omicron coronavirus variant should prove milder than previous mutations, a Reuters poll found.

Britain’s central bank was the first to increase interest rates since the coronavirus pandemic began, surprising many economists who had expected a delay. Median inflation forecasts for this quarter and the next quarter jumped to 5.2% and 5.5% in the latest poll. This was released on Friday, which was a jump from 4.7% and 4.6% respectively from the poll released in December.

Consumers will have another concern as prices of goods and services will continue to increase, energy bills are set to follow suit with a 50% increase. Supply-side disruptions and rising prices are weighing on British consumers’ confidence, threatening a long-anticipated recovery in spending. Recent findings have sighted that there is a drop in consumer sentiment to 9.1%. This has come amid of an increase in higher interest rates that have squeezed consumers’ incomes coupled with an increase in inflation to adjust for adjusted wage rate.

EUROPE

Due to the rising tensions between Russia and Europe as they dispute over Ukraine, shares in Europe have seen a fall for the forth consecutive week. These tensions have also resulted in surging energy prices in the region with further price rises expected as the US is threatening to imposture further sanctions on Russia

There has been a movement to normalize Covid restrictions as people are starting to move from the idea of a pandemic to endemic. As a results, Denmark was the latest to follow the UK, Ireland and the Netherlands in scrapping measures aimed at reducing the spread of corona. Similarly, Sweden, and Norway finally announced the possibility of easing restrictions although these countries remain at or near record highs.

aSIAN & pACIFIC

China has cut interest rates to increase economic growth as its economy slows. Towards the last quarter of 2021 China’s economy grew as much as 4% however this did not account for the latest effects of the omicron outbreak effects on a domestic level which affected the services and transportation industries.

Singapore also tightens their monetary policy on Tuesday to hedge against any inflation risk as global supply constraints increase inflation pressures within the region. The city state’s economy grew 7.2% last year as it had been rebounding from a 5.4% contraction in 2020. This come as the Government has proposed expansionary measures of over a S$100 billion in incentive over two years to cushion impacts made by the pandemic.

Japan is to maintain its tight boarder restrictions until the end of February to prevent the spread of the Omicron variant, this could to some extend affect Japan’s foreign direct investments as the transit of labor has been strained because some companies have not been able to bring employees to take up positions of significance. However, the World Health Organization (WHO) has advised to lessen restrictions as they do have a negative impact on society and are stramineous to the economy.

mARKETS FOR THE WEEK

	In Local Currency		In Sterling Pound
Index	Last week	YTD	Last week	YTD
UK
FTSE 100 Index	-0.37%	1.1%	-0.37%	1.1%
US
S&P 500 Index	0.51%	-6.96%	0.88%	-6.05%
Europe
Euro Stoxx 50 Index	3.22	-2.54%	2.31%	-3.36%
Asia
Nikkei 225 Index	-1.69%	-7.85%	-3.47%	-6.71%
Hang Seng Index	-4.49%	-0.65%	-4.24%	-1.67%
MSCI Emerging Markets Index	-1.73%	-3.01%	-2.17%	-2.34

hOW THE WEEK UNFOLDED

Monday: The Stock Market Just Staged a Massive Comeback from the brink of a major correction.

The S&P 500 rose 0.3% after falling 4% at one point during the day. Fears of tighter monetary policy from the Federal Reserve to regulate inflation and the flow of money with the economy could surface. In addition, a military conflict in Russia with Ukraine could lead to further upsets within the commodity markets and trader’s sentiments, as it could lead to the uncertainty of energy prices in Europe and the wider world to a greater extent.

Wednesday: China manufacturing has increased at a slower rate than previously expected in December

China’s factory-gate inflation rose slower than expected in December as the government took steps to contain raw material prices. The producer price index (PPI) climbed 10.3% from a year earlier, according to the NBS. Factory inflation has decreased from its high records in recent weeks to intervene stabilization in raw material prices and an ease in power crunches.

Thursday: Struggling UK families may need help with energy bills as inflation soars, International Monetary Fund expert has said.

This has been due to inflation rates that have been increasing brought about by an increase in interest rates. In addition, there has been also been an attempted invasion of Ukraine by Russia which could also pose for another cause for compounding the cost of living.