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The Long and Short of it, week ending 30 December 2022

Posted: 04 January, 2023

Topic: Telecoms , Financials , Basic Materials , Energy , Industrials , Technology

Publication Type: Market Commentaries

Stock markets moved marginally lower last week belying a relatively volatile week. Lighter, holiday-related trading volumes seemingly brought about decent sized daily moves in all 3 major stock market indexes despite a dearth of market-moving news. Uncertainty surrounding China’s easing Covid curbs in the face of surging cases seemed to be the major influence on market sentiment last week. The 10-year Treasury rate rose 14bps to 3.88% last week with increasing real rates and inflations expectations contributing equally. 10-year inflation expectations closed the year at 2.30%. For the year, the S&P 500 Index fell 19.4%, the Nasdaq Composite Index dropped 33.1% and the Dow Jones Industrial average gave up 8.8%. At week’s end, the S&P 500 Index decreased 0.1% to 3,839.5, the Nasdaq Composite Index decreased 0.3% to 10,466.48, the Dow Jones Industrial Average decreased 0.2% to 33.147.28, the 10-year U.S. Treasury rate rose 13bps to 3.88% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.8%.

European markets performed similarly to U.S. markets last week. Light holiday-related trading volume seemingly caused outsized daily market moves in leading market indexes on almost no news. As in the U.S., China’s continued relaxation of Covid curbs appeared to be the major focus of investors with positive sentiment due to easing curbs offset by negative sentiment resulting from surging covid cases. The STOXX 600 Index slightly underperformed the FTSE 100 index though both indexes ended the week lower. For the year, the FTSE 100 Index increased 0.9% and the STOXX 600 Index fell 12.9% with the FTSE 100 Index’s much larger exposure to U.S. dollar revenues and commodities providing the superior performance. At week’s end the FTSE 100 Index fell 0.3% to 7,451.74, the STOXX 600 index decreased 0.6% to 424.89, the 10-year UK government rate increased 4bps to 3.67%, the 10-year Bund rate rose 17bps to 2.56% and the British pound and euro strengthened 0.3% and 0.8%, respectively, both versus the U.S. dollar.