Market Monitor – 24 February 2023

Market Monitor – 24 February 2023

Global stock markets have endured another week of losses as investors face continued uncertainty about the extent of future interest rate rises

While improving economic data from major markets in North America and Europe would under normal circumstances be a cause for celebration, this is not the case in the current climate of persistent high inflation. Instead, signs of economic strength provide central banks with the option of continuing their current path of monetary policy tightening, with higher rates expected to act as a brake on medium-term growth as well as a dampener on company valuations.

Sentiment has also been hit by increasing geopolitical tensions as Russia’s president Vladimir Putin marked the first anniversary of Russia’s invasion of Ukraine by threatening to withdraw from a major nuclear disarmament treaty. Signs that the Chinese government is providing greater levels of political and economic support for their Russian counterparts has only made the situation more unpredictable.

United States

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 2% down for the week so far, with the S&P 500 shedding 1.6%. Data published on Tuesday showed a rebound in the American services sector, raising the likelihood of steeper interest rate hikes from the Federal Reserve in the first half of 2023. US markets responded with their worst day’s trading so far this year, with technology stocks being hardest hit. However, tech shares recovered some ground from Wednesday following a bullish forecast published by a leading semiconductor company.

UK

In the UK, the FTSE 100 closed on Thursday 1.2% down for the week so far, with shares in London also declining on rate rise fears. As was the case in the US, the British services sector returned to growth this month, while government borrowing in January fell unexpectedly following a surge in tax receipts. Weakness in global commodity markets also hit a number of the FTSE’s mining and energy companies, although there were positive trading statements from businesses in the aerospace and advertising sectors.

Europe

In Frankfurt, the DAX index ended Thursday’s session level for the week, while France’s CAC 40 lost 0.4%. New research showed the strongest eurozone growth levels since last spring, and while core inflation – which excludes the likes of energy and food costs – reached a new high in January, business sentiment continues to improve. Strong fourth-quarter results from the semiconductor and telecoms sectors also helped European markets avoid the losses seen in the US and UK.

Asia

In Asia, the Hang Seng index in Hong Kong dipped 1.8% after a mixed few days. The week began on a bright note on hopes for strong growth in 2023, with markets across China enjoying one of their best sessions since the autumn. The bounce was short-lived, however, as wider concerns about monetary policy in Western markets returned to centre stage. Meanwhile, Japan’s Nikkei 225 index of leading shares lost 1.5%, with the threat of steeper US interest rate hikes combining with weak manufacturing sector performance and concerns about rising domestic inflation to depress share prices.

17 February
23 February
Change (%)
FTSE 100
8004.4
7907.7
-1.2
FTSE All-Share
20088.9
19790.5
-1.5
S&P 500
4079.1
4012.3
-1.6
Dow Jones
33826.7
33153.9
-2.0
DAX
15482.0
15475.7
0.0
CAC 40
7347.7
7317.4
-0.4
ACWI
645.0
635.4
-1.5
Hong Kong Hang Seng
20719.8
20351.35
-1.8
Nikkei 225
27513.1
27104.3
-1.5

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 23 February 2023.

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24 February 2023
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