Market Insights Week 50

Date – 12th Dec’22

More anxious markets, over the outlook for growth in the year ahead, stalled the rally last week that began in mid-October. After two positive weeks in a row, the major stock indices fell around 3-4% in the US stock market. Officials from the World Bank and IMF (International Monetary Fund) are concerned about a worsening outlook for the global economy and the potential for a recession. The global growth forecasts for 2023 have been reduced to 2.7% against the previous expectation of 3.2%, as per IMF’s latest report.

In order to avoid recession, Central banks across the globe especially U.S. Federal Reserve strives to continue its effort and at the same time ‘Bear Market’ seems to stay here for some more time and test the patience of investors.

Let us highlight some of the major movements of the last week:

• The S&P 500 Index recorded its worst return in last 5 weeks and couldn’t stay above its 200-day moving average. It lost 137.32 points last week to close at 3,934.38 whereas, DJIA (Dow Jones Industrial Average) shed 953.42 points to end the week at 33,476.46.
• Within the S&P 500 index, health care, utilities and staples fared better however energy shares tumbled as oil prices fell sharply to its lowest level since January’22.
• Technology heavy NASDAQ also fell by 456.88 points to close at 11,004.62 and with a YTD (year-to-date) of -29.66%.
• In Europe, almost all the major indices fell as central banks tightened monetary policy in an effort to quell inflation.
• The pan-European STOXX Europe 600 Index and France’s CAX 40 slid almost the same i.e., 0.94% and 0.96% respectively.
• Italy’s FTSE MIB lost 1.40% and Germany’s DAX Index moved 1.09% lower whereas the UK’s FTSE 100 Index dropped 1.05%.
• European Central Bank (ECB) got support, especially from the central bank of Ireland and Bank of France, for a half-percentage-point increase this month, which if implemented, would take the deposit rate to 2%.
• Japanese stock markets generated modest returns with Nikkei 225 Index up 0.44% and the broader TOPIX Index rising 0.39% over the week.
• The yield on the 10-year Japanese bond (JGB) closed the week unchanged at 0.25% however, it touched 0.26% during the week.
• The Yen weakened and reached JPY 136.2 against the greenback, from about 134.3 at the end of the prior week.
• Beijing’s rapid easing of Covid related restrictions bolstered investor sentiment and the Shanghai Composite Index grew 1.6% and the blue-chip CSI 300 Index added 3.3%.

Important economic data will be released this week including the CPI index and retail sales growth. However, the most important is the press conference by US Fed Chair Jerome Powell, scheduled on Wednesday, which would reveal the two-day policy meeting outcome and key interest-rate hike numbers.

It looks like the stock market may retreat from the recent highs and there would be more buying opportunities at lower levels in the coming weeks and early 2023.

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