Market Monitor - 17 June 2022
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Market Monitor – 17 June 2022

Recent losses have intensified as stock markets around the world endured one of their toughest weeks of the year so far. With investors focusing once again on central bank attempts to curb rampant inflation, this week’s key events were policy decisions from the United States Federal Reserve, the European Central Bank (ECB) and the Bank of England (BoE) – in each case, however, officials offered little in the way of positive news

The eyes of the investment world were on Wednesday’s Fed announcement, which saw US interest rates rise by three-quarters of a percentage point – the biggest hike in almost three decades. This drastic step has convinced many analysts that Fed chair, Jerome Powell, has little choice but to force the US economy into recession in his bid to bring soaring prices back into check.

In the UK, the BoE made its latest quarter-point hike on Thursday, but with members of the Monetary Policy Committee (MPC) warning that inflation in Britain is likely to peak at 11% in the autumn, there were fears its actions were too timid and that a further more substantial rate rise will be needed at the next MPC meeting in August.

Meanwhile, inflation is not the only challenge facing policymakers in the eurozone: expectations of rate rises have driven up borrowing costs in a number of southern European countries. The ECB said on Wednesday it would take immediate steps to ensure the eurozone bond market remains in sync.

Elsewhere, cryptocurrency values continued to fall with Bitcoin hitting its lowest level since 2020, while oil prices – a key source of inflationary pressure – remained stubbornly high despite widespread recession fears.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 4.7% down for the week so far, with the S&P 500 losing 6%. The latter index is now down by almost a quarter since the start of the year, in large part due to the hammering taken by a number of major technology stocks as a result of rising interest rates.

Europe

In the UK, the FTSE 100 closed on Thursday 3.7% down for the week with investors increasingly concerned about a recession in Britain. Weak results from a raft of well-known high street names highlighted the challenges facing UK retailers at present.

In Frankfurt, the DAX index ended Thursday’s session down 5.3% for the week, while France’s CAC 40 lost 4.9% and is now more than 20% off its January peak – putting the index firmly in bear-market territory. European markets were further spooked by the Swiss central bank’s decision to raise interest rates for the first time since 2007.

Asia

In Asia, the Hang Seng index in Hong Kong dipped 4.4% with global recession worries adding to further losses among major Chinese technology businesses. Japan’s Nikkei 225 index of leading shares closed 5% lower for the week. This was despite a late rebound prompted by a number of major company share buybacks announced on Thursday.

April 1
April 7
Change (%)
FTSE 100
7317.5
7045.0
-3.7
FTSE All-share
4046.2
3888.3
-3.9
S&P 500
3900.9
3666.8
-6.0
Dow Jones
31392.8
29927.1
-4.7
DAX
13761.8
13038.5
-5.3
CAC 40
6187.2
5886.2
-4.9
ACWI
620.3
584.7
-5.7
Hong Kong Hang Seng
21806.2
20845.4
-4.4
Nikkei 225
27824.3
26431.2
-5.0

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, as at 16 June 2022.

21 June 2022
Jim griffin
Jim Griffin
Investment Content Manager
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Market Monitor – 17 June 2022

1 Manufacturers’ Goods Index, February, United States Census Bureau, 4/4/2022.
2 Oil giant Shell to take £3.8bn hit by leaving Russia, bbc.co.uk, 7/4/2022.

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