Week 38 in brief
North America
Equities in the US slid on Friday to end yet another week in the reds. All major indices capped their fifth negative week in six, with each index losing at least 4%. The US fed and other central banks announced yet another hike in interest rates as rampant inflation heightened fears of a global recession. The fed raised interest rates by 75 basis points.
The Dow Jones Industrial Average closed the week below 30,000 for the first time since June 17. The index narrowly missed the bear market territory with the 30-stock index ending Friday 19.9% below an intraday record.
How did the major US indices perform
On Friday:
- The Dow Jones Industrial Average tumbled 486.27 points, or 1.62%, to 29,590.41.
- The S&P 500 slid 1.72% to 3,693.23,
- The Nasdaq Composite dropped 1.8% to 10,867.93.
For the week:
- Dow gave up 4%.
- The S&P 500 shed 4.65%
- The Nasdaq lost 5.07%,
What drove the US market
- On Wednesday, The federal reserve continued its aggressive fight against inflation by raising interest rates again. The fed raised rates by 0.75 percentage points for the third time this year and released new economic projections showing a significant slowdown in the economy later in 2022 and 2023. This was also the fifth raise this year.
- U.S. bond funds witnessed huge outflows in the week to Sept. 21 as caution over the pace and length of U.S. interest rate increases crept in ahead of the Federal Reserve’s policy decision.
- Despite government bond funds receiving $3.02 billion in a fourth straight week of inflows and the U.S. equity funds securing $3.99 billion in net buying after facing outflows for four successive weeks, U.S. short/intermediate investment-grade, high yield, and general domestic taxable fixed income funds, all faced outflows, worth $3.59 billion, $1.81 billion and $692 million respectively.
How did the European markets perform?
- Stocks in Europe slumped sharply on Friday to end the week in losses as investors digested a raft of central bank decisions and a new economic plan from the U.K.
- The Bank of England hiked rates by 50 basis points Thursday, its seventh consecutive increase, and said it believed the U.K. economy was already in a recession. Also Thursday, the Swiss National Bank hiked its benchmark rate to 0.5%, a shift that brings an end to an era of negative rates in Europe.
- The pan-European STOXX 600 index (STOXX) dropped 2.3%, taking weekly losses to 4.4% - its worst week since mid-June.
- UK stocks (FTSE) lost 2%, with further losses capped by a 3% plunge in the pound.
- Germany, saw its main index (GDAXI) hit its lowest since November 2020, down 2.0% on Friday.
- Energy and Material stocks were the biggest losers as stocks in the sector sank nearly 6% on Friday, pushing a broader index of regional shares to near two-year lows.
- The only positive in the week was Spain upgrading its second-quarter economic growth outlook to 1.5% up from a previous 1.1% announced two months ago.
- European oil prices fell Friday to end in a fourth consecutive weekly decline
How did Asian markets perform?
- Equities in Asia tracked Wall Street into the reds as stocks fell for the third day Friday.
- On Friday, The Shanghai Composite Index dropped 0.3% to 3,098.87 and Hong Kong’s Hang Seng lost 0.3% to 18,085.72. The Kospi in Seoul tumbled 1.5% to 2,296.39.
- In Australia, the S&P/ASX 200 fell to its lowest levels since July on its return to trade after a holiday on Thursday, then recovered some losses to close 1.87% down at 6,574.70.
- MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.35%. Japan markets were closed for a holiday Friday.
- Elsewhere in Asia, inflation in Malaysia came in in line with expectations, while Singapore’s consumer price index rose more than expected. The Straits Times index extended losses after the announcement and was 1.14% lower in afternoon trade.
Bonds and Commodities
- Following the announcement of hiked interest rates by the Fed, US bonds witnessed huge outflows in the week to Sept. 21 as caution over the pace and length of U.S. interest rate increases crept in ahead of the Federal Reserve’s policy decision.
- The policy-sensitive 2-year US Treasury yield on Friday climbed to 4.266%, notching a 15-year high.
- The US 10-year benchmark treasury yield hit a 12-year high of 3.829% on Friday and it is set for an eighth weekly.
- Precious metals slid on Friday to end the week in losses. Spot gold was down about 1.4%, bringing it to $1,646.50 per ounce, to a low not seen since April 2020. Platinum saw the biggest slide, dropping 4.3% to $861.54. Spot silver decreased 4.1% to $18.85 per ounce. Palladium slid 3.8% to $2,087.67.
- WTI crude was down 2.5% to $81.33 a barrel. Shares of Exxon Mobil, Chevron, and Schlumberger were all down more than 2% in Friday premarket trading.
Currencies
- On Friday, the dollar hit its highest in two decades and extended its double-digit gains for the year against several currencies. The dollar index rose 1.6%.
- The euro fell for a fourth straight day, sliding 1.49% to $0.9689
- The Japanese yen weakened 0.68% to 143.34 per dollar but failed to notch its first weekly gain in more than a month. On Thursday, Japanese authorities intervened to support the currency for the first time since 1998.
- Sterling fell 3.49% to $1.0864 in its biggest single-day decline since March 2020. The pound was already under pressure before the tax cut announcement, down 11% since the start of July.
- On Friday, Bitcoin fell 2.57% to close at $18,904.00.
Next week
Investors can expect several key economic updates in the week ahead. On Tuesday, the latest reports on the housing market will become available, with the release of August new home sales and the S&P Case-Shiller Home Price Index for July. The Conference Board’s Consumer Confidence Index (CCI) and the University of Michigan’s Consumer Sentiment Index (MCSI) will offer updates on consumer sentiment.
On Thursday, the Bureau of Economic Analysis (BEA) will release its final estimate for second-quarter GDP growth. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, will arrive on Friday. Nike, Micron Technology, Carnival Corporation, and Bed Bath & Beyond will be among the companies reporting earnings.