Market Monitor – 2 December 2022

Market Monitor – 2 December 2022

Stock markets around the world have had a volatile if generally positive week. Fears about the wider impact of Covid-19 protests and slowing growth in China were overtaken by fresh indications that central banks in the west could start to reduce the pace of interest rate rises before the end of the year.

The week began on a downbeat note with negative sentiment driven by reports of anti-lockdown protests in several Chinese cities. A series of strict lockdowns in 2022 have acted as a handbrake on domestic growth and affected crucial supply chains throughout the global economy. The swift crackdown on protesters by Chinese authorities was initially taken as another sign that Beijing’s “zero-Covid” policy was likely to remain in place indefinitely. However, investors welcomed Tuesday’s announcement that China intends to ramp up its vaccination programme, potentially reducing the need for such tough anti-Covid measures in future. Markets were given additional impetus on Wednesday after Federal Reserve chair, Jerome Powell, said interest rate increases in the US may not need to be as steep as previously feared given that inflation now seems to be falling. While further rate rises appear to be inevitable over the coming months, the current signs are that rates will peak in 2023 at a lower level than previously feared.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.1% up for the week so far, with the S&P 500 gaining 1.3% on the back of Wednesday’s surge. The US economy grew more quickly than previously reported between July and September, although latest data indicates that America’s manufacturing sector contracted last month, for the first time since June 2020.

Europe

In the UK, the FTSE 100 closed on Thursday 1% up for the week despite a slew of weak economic data. Britain’s property market is struggling in the face of high mortgage rates and the rising cost of living: in November, house prices fell at their fastest pace in more than two years, while approvals for home loans have slumped to their lowest level since the early weeks of the pandemic. Output at UK factories, meanwhile, continues to decline as a result of rising costs, logistical issues and weakening demand.

In Frankfurt, the DAX index ended Thursday’s session down 0.4% for the week, while France’s CAC 40 gained 0.6%. The eurozone inflation rate declined for the first time since early 2021 in November thanks to falling energy prices, but the pace of food cost increases continues to accelerate – in Germany in particular. Manufacturing activity across the euro area did not fall as much last month as in October, but it remains on a downward trend.

Asia

In Asia, the Hang Seng index in Hong Kong rose 6.6%, with its recent rally continuing thanks to news of China’s Covid vaccination programme as well as regulatory changes that should make it easier for firms in the country’s beleaguered property sector to raise capital. Japan’s Nikkei 225 index of leading shares, meanwhile, was initially hit by fears about the wider impact of Chinese lockdowns on manufacturing supply chains, but recovered to a large extent on the back of gains in US markets.

25 November
1 December
Change (%)
FTSE 100
7486.7
7558.5
1.0
FTSE All-share
4112.3
4141.0
0.7
S&P 500
4026.1
4076.6
1.3
Dow Jones
34347.0
34395.0
0.1
DAX
14541.4
14490.3
-0.4
CAC 40
6712.5
6754.0
0.6
ACWI
625.1
635.9
1.7
Hong Kong Hang Seng
17573.6
18736.4
6.6
Nikkei 225
28283.0
28226.1
-0.2

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 1 December 2022.

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2 December 2022
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