Market Monitor – 25 November 2022

Market Monitor – 25 November 2022

Stock markets around the world have made steady gains this week on continued hopes that central banks may start to slow the pace of interest-rate rises. Minutes from the November meeting of the Federal Reserve in the United States have added weight to the idea that, although further rate hikes are inevitable as policymakers battle inflation, the kind of steep increases seen in recent weeks are unlikely to be repeated. This optimism could be seriously dented if November’s data shows an uptick in prices in the US economy. For the time being, however, investors are hopeful that the most acute phase of monetary-policy tightening is now behind us.

There were reminders also that higher rates are not the only headwind facing global markets: suggestions that Russia could cut natural gas supplies to Europe this winter pushed the price of the fuel to a two-month high. New forecasts from the Organization for Economic Cooperation and Development (OECD) meanwhile indicated that major European economies, in particular the UK, were likely to bear the brunt of next year’s slowdown. In addition, OECD officials added that central banks should keep increasing interest rates in order to ensure inflation is brought under control.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Wednesday – ahead of the Thanksgiving break – 1.3% up for the week so far, with the S&P 500 gaining 1.6%. As well as the encouraging Fed minutes, investors’ positive mood was heightened by solid earnings reports from the American retail sector. Hopes are high that consumer spending over the holiday season can remain resilient.

Europe

In the UK, the FTSE 100 closed on Thursday 1.1% up for the week to reach its highest level since just before the calamitous mini-budget in late September. London-listed energy stocks made strong gains on Tuesday after oil prices rose. There had been speculation on Monday (21 November) that major oil-producing nations may be considering production increases – which could lead to price falls – but these reports were quickly denied. Mortgage rates in Britain dropped back off recent highs, a development that is likely to ease the pressure on household budgets.

In Frankfurt, the DAX index ended Thursday’s session up 0.7% for the week, while France’s CAC 40 gained 0.9%. Although rising gas prices were far from welcome, there was positive news in the shape of a surprise upturn in November’s manufacturing and service sector performance in Germany. The latest measure of business confidence in the country also came in above forecasts.

Asia

In Asia, the Hang Seng index in Hong Kong dipped 1.8% with confidence hit by news that China’s government has imposed a number of new Covid-19 lockdowns in response to rising cases. New restrictions are now in force in parts of Beijing, Shanghai and Guangzhou, although officials said earlier in the month that some rules around quarantine would soon start to be relaxed. Japan’s Nikkei 225 index of leading shares had gained 1.7% by the end of trading on Thursday following Wall Street’s gains. The yen’s decline against the dollar also helped boost exporters earlier in the week.

18 November
24 November
Change (%)
FTSE 100
7385.5
7466.6
1.1
FTSE All-share
4056.6
4102.7
1.1
S&P 500
3965.3
4027.3
1.6
Dow Jones
33745.7
34194.1
1.3
DAX
14431.9
14539.6
0.7
CAC 40
6644.5
6707.3
0.9
ACWI
616.0
625.9
1.6
Hong Kong Hang Seng
17992.5
17660.9
-1.8
Nikkei 225
27899.8
28383.1
1.7

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 24 November 2022.

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25 November 2022
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