A new week began for equity markets, with stock exchanges around the world reopening after the weekend break and days of strong swings.
Stock markets open the week well in Asia
As always, we start in Asia. Tokyo was closed for the holiday. Hong Kong closed the session with a gain of 0.77%, while the Shanghai Composite was up 0.30%, Shenzhen +0.47% as was Mumbai. Seoul was down 0.95%.
On the European front, after a positive opening, Italian Piazza Affari turned negative, losing 0.15%. Frankfurt fell 0.22%, Paris 0.34%, London 0.07% and Amsterdam 0.6%.
Eyes on US Inflation
This week all eyes are on Wednesday’s US inflation data. When the data is released, both the effects on Treasury bonds and the Fed’s next steps are expected. Analysts predict that the interest rate hike could start as early as March.
Meanwhile, the world is reckoning with the Omicron variant. According to Goldman Sachs, Europe, where the new version of Covid1-9 is expected to lead to weak growth and not a new recession, can almost rest easy. In this scenario, the Eurozone is set to grow more than the United States, with GDP expected to be +4.4% in Europe in 2022 compared to 3.5% in the United States.
Goldman Sachs also believes that inflation in the Old Continent has already peaked in December at 2.6% and is now on a downward path.
Falling tech stocks
The US is on the back of a turbulent week which saw the Nasdaq fall 0.9% on Friday and the S&P 500 index lose 0.4%. The Nasdaq lost 4.5% in one week, its worst since February 2021.
The Omicron variant is affecting US markets. The fact that it is considered somewhat less “dangerous” is pushing up traditional stocks such as energy and financials to the detriment of technology stocks that have benefited in recent months from the restrictions needed to contain the pandemic.
Nearly all Big Tech stocks closed last week down:
- Netflix lost 10%,
- Microsoft dropped 6.6%,
- Alphabet closed down more than 5%.
In contrast, Wells Fargo, for example, gained 14.1%, while Schlumberger and Hess energy stocks did even better, gaining 17%.
We’ll have to wait for Wednesday’s data to see what the Fed will do about rising interest rates and how these decisions will impact the markets.
Source: https://en.cryptonomist.ch/2022/01/10/stock-markets-inflation-usa/