Market Monitor – 6 May 2022

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Market Monitor – 6 May 2022

Rising interest rates and the threat of a new global recession have caused renewed turbulence on stock markets around the world this week, with high levels of uncertainty and anxiety among investors leading to major swings.
On Wednesday, for example, markets in the United States posted their strongest gains in almost two years, only to see those advances evaporate 24 hours later

The root of this volatility is the interplay between inflation, economic growth and monetary policy. A number of central banks – including the Federal Reserve in the US and the Bank of England – have raised rates this week as expected in their attempts to bring spiralling price increases under control.
After the dust had settled, the Dow Jones Industrial Average ended trading on Thursday 0.1% up for the week so far, with the S&P 500 finishing 0.4% ahead. Both indices had surged by over 3% during Wednesday’s rally, only to see those gains instantly wiped out as a sense of doom returned to the markets, and yields on some government bonds – an indicator of future interest rate expectations – rose to their highest level in almost four years.

The US

After the dust had settled, the Dow Jones Industrial Average ended trading on Thursday 0.1% up for the week so far, with the S&P 500 finishing 0.4% ahead. Both indices had surged by over 3% during Wednesday’s rally, only to see those gains instantly wiped out as a sense of doom returned to the markets, and yields on some government bonds – an indicator of future interest rate expectations – rose to their highest level in almost four years.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 0.5% down for the week, following the Bank of England’s latest 0.25% base rate increase. Investors in Britain are particularly concerned about stagflation – a period of high price increases coupled with low growth. BoE governor Andrew Bailey said that the UK’s growth prospects were deteriorating due to inflation and the interest rate policy needed to control it . Sterling fell to its lowest level since mid-2020 on the news.
London-listed energy companies Shell and BP both posted eye-catching first-quarter results thanks to the high price of oil. News of the profits has increased pressure on the government to impose a one-off windfall tax on energy firms in order to help households deal with rising bills.
Meanwhile, new data highlighted the difficulties British manufacturers are facing in expanding their businesses as a result of slowing global demand, international supply-chain problems and the red tape that has been introduced since Brexit.

In Frankfurt, the DAX index ended Thursday’s session down 1.4% for the week, while France’s CAC 40 lost 2.5%. Investors are concerned that the European Commission’s plan to phase out imports of Russian oil will drive costs higher and make the European Union’s manufacturing sector less competitive.

Sanctions introduced after the invasion of Ukraine mean that German exports to Russia have fallen to their lowest level in almost 20 years.

Asia

In Asia, the Hang Seng index in Hong Kong dipped 1.4% as China continues to tackle a number of Omicron outbreaks. On Tuesday, credit rating agency Fitch downgraded its growth forecasts for the Chinese economy citing disruption linked to lockdowns in Shanghai and other major cities.
Japan’s Nikkei 225 index of leading shares, meanwhile, fell 0.1% this week, with rises in the value of the dollar against the yen helping to boost companies’ international earnings and avoid the steep share-price losses seen elsewhere.
April 1
April 7
Change (%)
FTSE 100
7544.6
7503.3
-0.5
FTSE All-share
4185.1
4145.6
-0.9
S&P 500
4131.9
4146.9
0.4
Dow Jones
32977.2
32998.0
0.1
DAX
14097.9
13902.5
-1.4
CAC 40
6533.8
6368.4
-2.5
ACWI
653.7
648.0
-0.9
Hong Kong Hang Seng
21089.4
20793.4
-1.4
Nikkei 225
26847.9
26818.5
-0.1
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, as at 7 April 2022.
6 May 2022
Jim Griffin
Jim Griffin
Investment Content Manager
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Market Monitor – 6 May 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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Important information

For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk.  Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

In the UK: issued by Threadneedle Asset Management Limited, registered in England and Wales, No. 573204. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated in the UK by the Financial Conduct Authority.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Cownnaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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