Market Monitor – 16 December 2022
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Market Monitor – 16 December 2022

Stock markets around the world extended their recent losses this week after central bankers indicated their current programme of monetary policy tightening would extend well into 2023.

Interest rates in the US, the eurozone and the UK were raised again this week despite recent data showing that inflation may have reached a peak. But policymakers warned that victory in the battle against price rises remained some way off. The US Federal Reserve, the European Central Bank (ECB) and the Bank of England (BoE) have each taken pains to stress that their hawkish monetary policies will continue until the rate of annual price rises is considerably nearer the 2% target. They point out that the biggest risk to economic growth over the longer term is entrenched inflation. From investors’ point of view, however, this raises the likelihood of a sustained global recession, at least in the short term, as high interest rates dampen economic activity around the world.
A surge in Covid-19 infections in China following authorities’ recent decision to relax their strict lockdown policies added to the week’s negative sentiment as markets worried that the Beijing government could be forced to reimpose restrictions.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.8% down for the week so far, with the S&P 500 losing 1%. Technology and other growth stocks rose earlier in the week after latest figures showed a second consecutive monthly decline in inflation in the US, while the Fed’s interest rate rise of 50 basis points (bps) on Wednesday was in line with expectations. But US markets fell in the wake of comments from Fed chair, Jerome Powell, which indicated that he and his colleagues would continue to raise rates regardless of the consequences for short-term growth.

Europe

In the UK, the FTSE 100 closed on Thursday 0.7% down for the week after the BoE raised rates by 50pbs, taking the base rate to 3.5% – its highest level since the financial crisis. Latest data showed the British economy had grown faster than expected in October but is expected to have since cooled, not least as the result of a series of nationwide labour disputes involving nurses, rail workers and Royal Mail staff, among others. Annual inflation in November dropped back to 10.7% as rises in the cost of petrol and clothing slowed.
In Frankfurt, the DAX index ended Thursday’s session down 2.7% for the week, while France’s CAC 40 lost 2.3%. European markets were particularly disappointed by an ECB statement indicating that policymakers expect to have to raise interest rates “significantly further” in order to bring inflation under control. Factory production across the eurozone fell sharply in October as the result of high energy prices and declining demand. Cold weather across Europe, meanwhile, drove gas prices higher again, potentially adding to inflationary pressures.

Asia

In Asia, the Hang Seng index in Hong Kong fell 2.7% after a surge in Covid-19 infections was reported in Beijing and other major cities. This raises questions about the Chinese government’s recent decision to lift its most severe pandemic-era restrictions. Japan’s Nikkei 225 index of leading shares had risen 0.5% by Thursday’s close following positive inflation news from the US. Stocks in Tokyo were expected to follow Wall Street downwards on Friday, however.
8 December
15 December
Change (%)
FTSE 100
7476.6
7426.2
-0.7
FTSE All-Share
4087.4
4063.6
-0.6
S&P 500
3934.4
3895.8
-1.0
Dow Jones
33476.5
33202.2
-0.8
DAX
14370.7
13986.2
-2.7
CAC 40
6677.6
6522.8
-2.3
ACWI
619.4
612.7
-1.1
Hong Kong Hang Seng
19900.9
19368.6
-2.7
Nikkei 225
27901.0
28051.7
0.5
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 15 December 2022.
19 December 2022
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Market Monitor – 16 December 2022

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In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

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Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important information

For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

In the UK: issued by Threadneedle Asset Management Limited, registered in England and Wales, No. 573204. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated in the UK by the Financial Conduct Authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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