It was generally a positive week in markets across the world – with China the only major market to register losses, though we did see a turnaround later in the week. This week is a clear example of what we mean when we talk about volatility – volatility means you can get big swings either way in markets. Last week Omnis published a video that looks at why it’s important to stay calm when markets become volatile. You can watch this video here.
Last week’s performance – major stock markets
| S&P 500 | +6.16% |
| Nikkei 225 | +6.62% |
| CSI 300 | -0.94% |
| Euro Stoxx 50 | +5.85% |
| FTSE 100 | +3.48% |
Commentary
US: The Federal Reserve raises interest rates for the first time since 2018
Stocks moved higher for the week, ending a two-week losing streak. Markets were supported by multiple factors, including falling oil prices, news that Russia had avoided defaulting on its sovereign debt, and the outcome of the Federal Reserve’s monetary policy meeting, where it raised interest rates by 0.25%, as widely expected. While fighting continued in Ukraine, investor sentiment was also buoyed during the week by continued negotiations to end the conflict.
Japan: Central Bank support and falling Covid cases boost sentiment
Investor sentiment was supported by the Bank of Japan’s continued commitment to supporting the economy, which contrasts many other central banks who are beginning to remove support. Also, the government’s announcement that it was set to lift all remaining quasi-states of emergency given the downward trend in daily coronavirus infections did also improve investor sentiment.
China: Policymakers vow to support economy and financial markets
Markets weakened during the week but turned most positive towards the end of the week. Policymakers in China vowed to ensure stability in capital markets, support overseas stock listings, resolve risks around property developers and complete the crackdown on Big Tech “as soon as possible.” This contributed positively to investor sentiment and the last three days of the week saw positive returns for stocks.
Europe: Cautious optimism amid negotiations between Russia and Ukraine
Shares in Europe gained ground for a second consecutive week amid cautious optimism that negotiations between Russia and Ukraine could yield a peace plan. China’s announcement that it would take measures to support the economy and financial markets also appeared to boost sentiment. European Central Bank President Christine Lagarde warned that the Ukraine conflict could trigger “new inflationary trends” and “posed significant risks to growth.”
UK: Bank of England raises interest rates to curb inflation
The Bank of England (BoE) raised interest rates to 0.75% aiming to curb inflation that it now expects to reach 8% by June, in part due to the Russia’s invasion of Ukraine. It said that further action may be needed but that it was a fine balancing act. The BoE’s tone of voice suggests it may be softening its stance on raising interest rates aggressively, likely due to the potential real economic effects of the Ukraine conflict. Many still expect further interest rate hikes in 2022.
