Equities fall further on interest rate and growth fears

The tech-heavy NASDAQ saw its biggest drop since the pandemic whilst Netflix saw a fall of over 20% on Friday following its earnings report – erasing all its pandemic price gains. The S&P 500 also fell below its 200-day moving average; a key technical level which can induce further selling action.

There is an increased expectation of a Federal Reserve interest rate hike in March, and their meeting on Wednesday will be closely watched. However, despite this expectation, US treasuries saw yields move lower (and prices higher) throughout the course of the week as investors sought safe haven assets.

It was a quiet week for US economic data, although there was some mixed data on the housing front as a slight fall in the Housing Market Index fall was offset by a 1.7% rise in housing starts during December 2021.

The Chinese economy has seen a challenging 12 months in newsflow, but Q4 2021 GDP surprised to the upside and helped lift overall GDP growth for the calendar year to 8.1%. A growth rate well above the average from recent years.

In the UK retail sales disappointed as the December year-on-year growth number came in at -0.9%, versus an estimate of 3.7%.

Within Europe, stocks follows global indexes lower whilst the key German 10 year bund yield briefly moved into positive territory for the first time in almost three years. Sovereign bonds ultimately gained in value as ECB President Lagarde sought to dispel expectations of an interest rate rise in the eurozone this year.

Simmering tensions in Ukraine also contributed to a more cautious stance on the continent.

Within commodities narratives around inflation, economic activity, and geopolitical concerns all combined to send oil to a seven year high.

Equities

Global stocks were down last week by -4.3% in euro terms and down -4.8% in local terms. Year-to-date global markets are down -6.2% in euro terms and -6.4% in local terms. The US market, the largest in the world, was down -5.3%in euro terms and down -5.8%in local terms.

Fixed Income & FX

The US 10-year yield finished at 1.74%last week. The German equivalent finished at -0.09%. The Irish 10-year bond yield finished at 0.41%to remain in positive territory. The Euro/US Dollar exchange rate finished at 1.13, whilst Euro/GBP finished at 0.84.

Commodities

Oil finished the week at $86 per barrel and is up 14.4% year-to-date in euro terms. Gold finished the week at $1,841 per troy ounce and is up 1.1% year-to date in euro terms. Copper finished the week at $9,984 per tonne.

The week ahead

Monday 24^th January

Flash PMIs from the US, eurozone, and UK go to print.

Wednesday 26^th January

The Federal Reserve meets for its latest interest rate decision.

Friday 28^th January

The Personal Consumption Price Index is published in the US.