Market Monitor – 4 November 2022
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Market Monitor – 4 November 2022

Global stock markets have begun November in a downbeat mood as hopes that central banks might soon start slowing the pace of interest rate rises have been dashed. Both the US Federal Reserve and the Bank of England (BoE) raised rates by 75 basis points this week, which was in line with expectations.

Investors had hoped, however, that policymakers would provide some indication that rates could be close to their peak. Despite the growing likelihood of recession on both sides of the Atlantic, this appears not to be the case. Both Fed chair, Jerome Powell, and BoE governor, Andrew Bailey, repeated the mantra that even as growth starts to slow, bringing inflation under control remains their priority – a view endorsed by European Central Bank president, Christine Lagarde, later on Thursday.

The job of central banks has been made more challenging by strength in the labour market: latest figures show that in both the US and the eurozone unemployment remains low and a lack of vacancies is leading to higher wages, adding to the upward pressure on prices. However, a number of indicators suggest major economies in Europe and North America may be on the verge of a slowdown, if not already in recession.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 2.6% down for the week so far, while the S&P 500 lost 4.6% as recent optimism that interest rate rises may soon come to a halt evaporated. Powell made it clear that the Fed will continue tightening monetary policy until it sees clear signs of slowing price rises. As yet, he said, there is little indication the battle against inflation is being won. Energy stocks also lost ground this week on fears the Biden administration could introduce a windfall tax on what it views as excessive profits.

Europe

In the UK, the FTSE 100 closed on Thursday 2% up for the week, despite the BoE’s gloomy prognosis. After announcing the steepest interest rate rise in several decades, Bailey warned that Britain was facing a long-lasting – albeit shallow – recession which is unlikely to end until 2024. He added, however, that interest rates in the UK are likely to peak next year at a lower level than the market is currently expecting. Bailey’s comments saw the pound fall to its lowest level versus the US dollar since mid-October, with sterling weakness combining with rising commodities prices to provide a boost to many of the multinational companies that dominate the FTSE 100.

In Frankfurt, the DAX index ended Thursday’s session down 0.9% for the week, while France’s CAC 40 lost 0.5%. On Monday it was reported that eurozone inflation had hit a record high of 10.7% in October, up from 9.9% a month earlier. Russia’s decision to withdraw from a deal to guarantee the safety of grain exports from Ukraine through the Black Sea also led to sharp rises in wheat prices, although the Kremlin appeared to backtrack on its decision later in the week.

Asia

In Asia, investors in Hong Kong finally had something to celebrate as the Hang Seng index brought its recent run of losses to an end. It had risen 3.2% by Thursday’s close after it emerged officials were considering reopening travel between Hong Kong and mainland China. However, a new Covid-19 lockdown centred on a Zhengzhou factory which makes electronics for a major US technology firm was the latest example of the economic impact of Beijing’s “zero-Covid” policy. In Japan, the Nikkei 225 index of leading shares closed 2.1% ahead as a number of Tokyo-listed companies reported strong third-quarter earnings.

28 October
3 November
Change (%)
FTSE 100
7047.7
7188.6
2.0
FTSE All-share
3855.8
3926.9
1.8
S&P 500
3901.1
3719.9
-4.6
Dow Jones
32861.8
32001.3
-2.6
DAX
13243.3
13130.2
-0.9
CAC 40
6273.1
6243.3
-0.5
ACWI
589.0
570.8
-3.1
Hong Kong Hang Seng
14863.1
15339.5
3.2
Nikkei 225
27105.2
27663.4
2.1

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 3 November 2022.

4 November 2022
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Market Monitor – 4 November 2022

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Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important information

For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk.  Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

In the UK: issued by Threadneedle Asset Management Limited, registered in England and Wales, No. 573204. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated in the UK by the Financial Conduct Authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414.  TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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