Weekly Market Wrap 07/01/2022

Santa ended his rally on Wednesday as stock markets in North America fell this week as the Fed indicated it may tighten monetary policy at a faster rate than the market had expected. Technology stocks were the hardest hit. Moreover, the markets reacted to a severely missed nonfarm payroll report, with only 199,000 jobs added in December, driving some moderate dollar weakness. Asia and Europe finished the week mixed as the markets digest some positive earnings but remain cautious on somewhat weak macroeconomic data. Omicron concerns are beginning to recede, but sentiment has still been impacted by the record number of cases globally.

US Market 

The S&P 500 is down 1.47% to 4,696.05. This constitutes some retracement after a bullish start to the year, as the Fed signals a slightly more aggressive timeline for removing stimulus, despite a recent weaker-than-expected jobs report and the Omicron variant driving up global Covid-19 case numbers.

UK Market 

The FTSE 100 ended the week up 0.96% at 7,455. The index began the trading week strongly on Tuesday gaining more than 1.6%. However, after news on Wednesday evening that the US Federal Reserve may begin raising interest rates faster than previously expected, the FTSE dipped on Thursday, giving up some of the weeks early gains. A study released on Friday showed that UK house prices are currently rising at the fastest pace seen since 2007, with the rise driven by low mortgage rates and strong competition for homes.

European Markets 

The Euro Stoxx 50 gained 0.22% this week, reaching 4,307. This week has been mixed for European markets with strong gains seen in the early part of the week and a significant drop was seen on Thursday. Eurozone inflation data released this week showed inflation hit a record high in December 2021, increasing pressure on the European Central Bank who have stuck to the narrative that rising inflation is only temporary. The CAC 40 also gained 0.98% whilst the DAX rose 0.40%.

Fixed Income

The US 10-Year Treasury Yield rose 0.31 percentage points to 1.745%, as rates are breaking out to new year highs and the key 1.7% handle has been broken, as the market confirms secular inflation, and it is time to pay closer attention to this space.

Commodities

WTI Crude rose 5.43% to 79.46, as some supply disruptions have taken place and OPEC+ looks past the pandemic and continues to increase supply, as planned, which constitutes a bullish signal.

The Week Ahead  

Tuesday – Australia Retail Sales and Trade Balance

Wednesday – China CPI; US CPI

Friday – UK GDP; UK Manufacturing Production; US Retail Sales: Michigan Consumer Sentiment

*Price changes as of last week’s close unless stated otherwise.