Market Monitor - 21 January 2022
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Market Monitor – 21 January 2022

Global stock markets have enjoyed mixed fortunes this week as the Omicron variant continues to spread around the world. The emergence of a highly infectious new strain of Covid-19 in December has created a serious headache for central bankers, who are currently also contending with cross-border supply-chain blockages and soaring inflation.

While policymakers are looking to increase interest rates and withdraw stimulus measures in an effort to bring price rises under control, doing so has become far riskier as a result of Omicron’s impact on economic activity.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 3.3% down for the week so far, with the S&P 500 losing 3.9%. Both indices have lost around 6% in value since hitting all-time highs at the start of the month. Investors in the US are concerned that the Federal Reserve will soon raise interest rates, despite the fact that the latest coronavirus wave is still raging across the country. On Thursday, a surprise increase in new unemployment claims became the latest indication of the economic damage being wrought by Omicron.

Investment bank Goldman Sachs was one of the biggest fallers in the US this week: its shares were down 8% on Tuesday thanks to a 33% rise in pay and benefits for staff last year.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 0.6% up for the week, with shares in British companies benefiting from signs that the latest wave of the pandemic is starting to ease. With infection levels and hospitalisation rates both now starting to fall, businesses in sectors such as travel and hospitality are benefiting from growing consumer optimism. The government, meanwhile, has removed its most recent Covid-19 restrictions – and has suggested that such measures may not be re-introduced in future as the country learns to co-exist with the virus.

The UK continues to face serious economic challenges, however, with inflation reported to have hit 5.4% in December, its highest level in nearly 30 years. The Bank of England now expects price rises to continue throughout 2022, and is expected to raise interest rates again at the next opportunity. Shares in Unilever fell sharply at the start of the week as its plans to buy rival GlaxoSmithKline’s consumer arm met with criticism.

In Frankfurt, the DAX index ended Thursday’s session up 0.2% for the week, while France’s CAC 40 gained 0.7%. Signs that the Omicron wave is starting to ebb across the eurozone have given investors cause for optimism, although new data showed that inflation across the single-currency area has now risen to its highest level since the euro was created in 1999.

Asia

In Asia, the Hang Seng index in Hong Kong rose 2.3% thanks to the Chinese government’s latest efforts to boost the domestic economy with looser monetary policy. Surprise cuts in lending rates saw shares across China’s beleaguered property sector rise.

Japan’s Nikkei 225 index of leading shares, meanwhile, had lost 1.2% by Thursday’s close. Electronics conglomerate Sony was one of the week’s biggest fallers in Tokyo: its shares slumped on the news that rival Microsoft intends to buy videogames publisher Activision in a deal worth almost $70 billion.

January 14
January 20
Change (%)
FTSE 100
7543.0
7585.0
0.6
FTSE All-share
4256.6
4274.5
0.4
S&P 500
4662.9
4482.7
-3.9
Dow Jones
35911.8
34715.4
-3.3
DAX
115883.2
15912.3
0.2
CAC 40
7143.0
7194.2
0.7
ACWI
744.4
725.4
-2.5
Hong Kong Hang Seng
24383.3
24952.4
2.3
Nikkei 225
28124.3
27772.9
-1.2

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 20 January 2022.

21 January 2022
Mark King
Mark King
Head of Investment Content
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