Market Monitor - 28 January 2022

Market Monitor – 28 January 2022

Global stock markets have endured another highly volatile week as a result of concerns about rising interest rates and the growing threat of conflict in Ukraine.

Monday’s session was particularly turbulent: indices in Europe posted their heaviest losses in months, while their counterparts in the United States also dropped into correction territory in early trading. However, a remarkable recovery on Wall Street later in the day pushed many stocks back into the black. The technology-heavy Nasdaq 100 index, for example, closed 0.5% up having been 4% lower at one point during the day.

Monday’s rollercoaster ride reflected a lack of consensus over the Federal Reserve’s plans for monetary policy in the US, as well as uncertainty over the potential economic impact of any military action by Russia on its border with Ukraine. Against a backdrop of high Omicron infection levels around the world, it is no surprise that investors are in a jittery mood.

The Fed’s statement on Wednesday did little to calm nerves: chair Jerome Powell said he was preparing to increase interest rates in March in an attempt to curb rising prices, with some analysts criticising the bank for failing to act quickly enough to deal with the threat of soaring inflation.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday just 0.3% down for the week so far, with the S&P 500 1.6% lower. The higher proportion of technology stocks on the latter index have been the main reason for its weaker performance: tech company valuations typically suffer more in a rising interest rate environment.

But American investors were given a boost on Thursday with the publication of new data showing the US economy had grown more quickly than expected between October and December last year.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 0.8% up for the week: once again, share prices in London have managed to outperform much of the rest of the world. In part, this is likely to be related to the fact that UK investors have already priced in at least one more interest-rate increase this year following the Bank of England’s December hike. Rising oil prices have also provided support for the likes of BP and Shell, while the British economy looks to have started its recovery from the Omicron-inspired blip at the end of 2021.

In Frankfurt, the DAX index ended Thursday’s session down 0.5% for the week, while France’s CAC 40 lost 0.6%. Although the European Central Bank has ruled out raising interest rates in the short-term, investors in the eurozone are worried that action may need to be taken imminently to keep price rises in check.

Asia

Markets in Asia suffered another week of severe losses, with the Hang Seng index in Hong Kong down 4.6% by Thursday’s close and Japan’s Nikkei 225 index of leading shares almost 5% lower.

Technology stocks across the region performed particularly badly following falls on Wall Street early in the week: in Tokyo, early-stage tech investor SoftBank lost almost 10% of its value during Thursday’s session while electronics giant Sony was down by nearly 7% on the same day.

January 21
January 27
Change (%)
FTSE 100
7494.1
7554.3
0.8
FTSE All-share
4217.3
4230.8
0.3
S&P 500
4397.9
4326.5
-1.6
Dow Jones
34265.4
34160.8
-0.3
DAX
15603.9
15524.3
-0.5
CAC 40
7068.6
7023.8
-0.6
ACWI
712.8
694.8
-2.5
Hong Kong Hang Seng
24965.6
23807.0
-4.6
Nikkei 225
27522.3
26170.3
-4.9

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 27 January 2022.

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28 January 2022
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Global stock markets had a difficult week, with technology stocks in particular giving up some of their recent gains.
Global stock markets had a difficult week, with technology stocks in particular giving up some of their recent gains.
Global stock markets surged ahead this week as the prospect of an interest rate cut in the United States grows ever closer.

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