Inflation fueled by geopolitical tensions, supply chain constraints and corrective steps by Central banks across the globe, primarily tightening of monetary policy, has been the dominant force of the market in the last week as well. In the wake of continued elevated inflation across most of the developed markets, almost 80% of the central banks are hiking interest rates and indicating that the monetary policy could be more hawkish than expected in the near future.
Let us outline some of the significant developments of the last week:
- With the latest hike by the US Fed, interest rates rose to their highest in more than a decade.
- The US market ended noticeably lower for the week where the Dow Jones Industrial Average Index went down 4%, the S&P 500 fell 4.7% and Nasdaq Composite Index tumbled 5.1%
- MSCI EAFE (Morgan Stanley Capital International for Europe, Australasia and the Far East) Index went down by 3.1% and closed at 1,734 over the week, which is -25.8% YTD (year to date).
- The two-year U.S. Treasury note yield reached 4.10%, its highest level since October 2007 and 10-year yield closed at 3.77% which is at its highest mark since November 2008.
- The STOXX Europe 600 index dropped to its lowest level in more than a year and closed down by 4.37% over the week.
- Other European markets major indices, Germany’s DAX and France’s CAC 40 lost 3.59% and 4.84% respectively.
- The UK’s FTSE 100 index shed 3.01% and Italy’s FTSE MIB lost 4.72% in the market week, 19th-23rd September 2022.
- Following fresh interest rate hikes by European central banks, yields on Government bonds in the European market rose to fresh highs. Italian, Spanish and French yields jumped significantly, more noticeably; German 10-year Govt. bond rose to its decade highs.
- Against the market expectation of 75 bps, the Bank of England hiked its key rate only by 0.5% which lifted it to 2.25%.
- The UK pound sterling fell to its 37 years low reaching 1.09 against greenback, the US dollar.
- In Asian market, the Japan’s Nikkei 225 index closed down 2.6% and China’s Shanghai Composite Index slipped 1.2% over the last trading week.
- The US dollar index rallied to fresh gains and rose by 1.7% to close at 113.01 over the week.
- In the energy sector, WTI crude oil fell by USD 4.75 to reach USD 78.74 per barrel.
- At the same time, the gold spot price also declined USD 30.20 to reach the level of USD 1,650.90 per ounce.
The current range bound market requires patience from investors and it should eventually start recovering as and when data starts favoring the market.
The current trading week is full of reports from global markets like Australia’s credit data, Japan’s trade balance and Industrial production figures, Germany’s CPI, UK’s GDP and other statistics etc., which can define the global market actions in the remaining sessions for the month.
We will come back with more updates soon!