Company / Analytics

Analytics, 31 July 2022

Week 30 in Brief

North America

Wall Street posted solid gains this week, with markets surging on Friday to end the best-performing month for the three major US indices since 2020. A surge in both growth and tech stocks, thanks to better-than-expected earnings, rallied the indices to gains.

The most interesting part, however, is the fact that the Federal Reserve announced another rate hike of 75 basis points (bps) earlier in the week. The Fed also released a report showing an unexpected decline in the second-quarter gross domestic product (GDP). Following Fed Chair Jerome Powell suggesting a pullback on future rate hikes, Analysts believe the Fed will announce a 50 basis points increase in the next policy meeting set for September.

How did the major indices perform?

On Friday:

For the week:

What drove the U.S. market?

With most companies announcing second-quarter earnings, US corporate results were mostly stronger than expected.

77.8% of the 278 S&P 500 companies that have reported earnings so far have exceeded expectations. The expected eventual earnings increase for S&P 500 companies for Q2 is now at 7.1%, contrary to analysts’ expectation of 5.6% posted earlier in July.

Amazon and Apple shares gained 10.4% and 3.3% respectively, as the companies released their earnings reports. Apple Inc. indicated that the shortage in parts was easing and the demand for iPhone products continued to increase. As for Amazon, forecasts for the third-quarter revenue jumped with an increase in fees from its Prime loyalty subscriptions.

A government report released on Thursday showed the American economy unexpectedly contracted in the second quarter, indicating to investors that the possibility of a recession would lead the Fed away from further interest hikes.

How did the European markets perform?

European equity markets also surged on Friday to end the week in gains. The market ended in the first monthly gains in four, thanks to better-than-expected earnings from most European corporates.

The Pan-European STOXX 600 posted its best monthly performance since November 2020, a result that overshadowed the general fear of a global recession for investors. The Index on Friday rose 1.3% to reach a 7-week high.

The Eurozone recorded a faster-than-expected economic growth in Q2, with gross domestic product rising 0.7% quarter-on-quarter in Q2 for a 4.0% year-on-year gain, strongly beating expectations of a 0.2% quarterly and 3.4% annual gain. This boosted sentiment amongst investors and traders, leading to gains in the week. The only downside for the week was the Inflation figures for July. Inflation in the Eurozone rose to a record high in the month at 8.9%, as compared to 8.6% for the month of June.

How did Asian markets perform?

Most of the Asian stocks closed the week in a slump, with exception of India’s Nifty 50 stock index and the S&P BSE Sensex. India’s blue-chip Nifty 50 index closed 1.35% higher on Friday at 17,158.25, while the S&P BSE Sensex (.BSESN) rose 1.25% to 57,570.25. They both settled at their three months highs. For July, the Nifty rose 8.7%, while the Sensex climbed 8.6%.

In Hong Kong, the Hang Seng index had a generally bad week as its heavyweights, Aibaba and Meituan saw massive losses on Friday. The index fell more than 2% on Friday, as Alibaba and Meituan dropped 7.01% and 7.18% respectively.

This was Alibaba’s third straight decline in the week following news that several Ant Group executives had stepped down as Alibaba partners. In the case of Meituan, the company was summoned by Hangzhou’s market regulator over food safety and price competition, leading to uncertainties among investors.

Japan’s benchmark Nikkei 225 lost 0.05 percent to 27,801.64, down 0.4 percent on the week while South Korea’s KOSPI added 0.67 percent to 2,451.50, rising 2.44 percent weekly.

Bonds and Commodities

In commodities, Gold saw gains on Friday, rising 0.38% to $1,762 an ounce. This was as a result of the strong dollar an treasury yields. The yield on benchmark 10-year Treasury notes US10YT=RR was at 2.6704% while the two-year note’s US2YT=RR yield, which typically moves in step with interest-rate expectations, was at 2.8399%.

Brent crude futures LCOc1 turned negative, dropping 0.14% to $106.99 a barrel after hitting $108 in previous trade, and U.S. West Texas Intermediate crude (WTI) CLc1 was at $96.64.

Currencies

In cryptocurrencies, bitcoin price has been extremely bullish ever since July 26, when it kick-started a second bullish leg. On Friday, bitcoin slipped by 0.36%. Partially reversing a 3.90% gain from Thursday, bitcoin ended the day at $23,769. Bitcoin fell for the seventh time in ten sessions.

In the case of Fiat currencies, The euro rose 0.2% versus the dollar to $1.0213. Against the yen, the dollar slid 0.7% to 133.42 yen. The greenback also posted its largest monthly percentage fall since July 2020.

Investors sought to move into the Yen, as it acts as the general substitute for the dollar in the global forex market. The movement can be credited to uncertainties over the Fed’s raise in interest rates.

Next week

The US government is expected to release several key reports on jobs next week that could have an impact on market movements and the Fed’s next policy changes.

Next week will also be packed with earnings announcements. The energy sector could be a standout with more reports due from major oil companies. OPEC+ will meet on Wednesday to discuss oil production quotas, as the U.S. puts pressure on its members to raise output.

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