Markets Update Monday 24/01/2022 – Nose-Dive

Frankfurt – 24/01/2022

Nose-Dive

To speak of a “black Monday” would perhaps be too much of a bad thing. But the start of the new stock market week brought a deep blow.

The Ukraine crisis’s most recent escalation weighed most heavily after a weekend without rapprochement. NATO’s planned troop build-up in Eastern Europe highlighted the risks of confrontation. In Moscow, the danger of war has never been so great, Kremlin spokesman Dmitry Peskov said. According to NATO Secretary-General Jens Stoltenberg, the alliance’s forces are on alert. Investors also increasingly fled Russian stocks for fear of Western sanctions. In the late evening, however, it was announced that representatives of Russia and Ukraine would meet for talks in Paris on Wednesday. According to reports from Paris, a meeting with the level of advisors is to take place with France and Germany.

The topic of the interest rate turnaround cannot be pushed aside this week either because the US Federal Reserve meets on Tuesday and Wednesday. At the press conference on Wednesday, Fed Chairman Jerome Powell will give further signals on the pace of interest rate hikes. Recently, concerns had increased that the Fed might move faster than expected because of high inflation. There is even speculation about a possible rate hike of 0.5 percentage points.

US Markets at a glance

Wall Street was able to fight its way out of the deepest loss zone in the end. The Dow Jones slid massively at times in Monday trading, initially continuing its weak performance of the previous week. In late trading, however, the mood improved noticeably, and the stock market barometer not only reduced its losses but even made it into green territory. In the end, it gained 0.30 per cent to 34,366.67 points. The NASDAQ Composite tech index also fell significantly on Monday. However, investors in tech stocks also gained hope late in the day and lifted the stock market barometer into the profit zone. With a gain of 0.63 per cent, it went into the evening at 13,855.13 points.

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High inflation, the expectation of faster rising interest rates, the Omikron infection wave, a so-far mixed reporting season and then the Ukraine conflict – all this dampened the mood of investors.

Investors are also eagerly awaiting Wednesday’s press conference for the first US Federal Reserve meeting this year. 

Far East Markets at a glance

The Far East stock markets showed different tendencies at the beginning of the new trading week. The Nikkei in Japan closed 0.24 per cent higher at 27,588.37 points. On the Chinese mainland, the Shanghai Composite rose 0.04 per cent to 3,524.11 points, while the Hang Seng fell 1.24 per cent to 24,656.46 units in Hong Kong.

Negative guidance from the USA also weighed on sentiment in the Asian markets. In addition, the already well-known interest rate worries and the spread of the highly contagious Omikron variant of the coronavirus weighed on sentiment. Meanwhile, turnover was low because of the Chinese New Year celebrations, which will last several days at the end of the month.

European Markets at a glance

The European stock markets saw heavy losses on Monday. The EuroSTOXX 50 increased its initial loss considerably in the further course and ended the trading day 4.14 per cent lower at 4,054.36 points.

After an already weak start, the DAX literally collapsed, temporarily even falling below the 15,000 mark. At the sound of today’s closing bell, the DAX was still down a hefty 3.80 per cent at 15,011.13 points. The TecDAX also extended its early losses and closed 4.57 per cent lower at 3,344.11 points.

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Interest rate fears, which had pushed US tech stocks in particular into the red on Friday, also spilt over to the European stock markets. In addition, the Fed meeting on Wednesday is the main topic on the market. In the meantime, the financial markets are pricing in five interest rate steps this year. Increasingly, it is not being ruled out that 50 basis points could raise key interest rates in March.

Forex, gold, oil and crypto

Today, the euro lost some of the gains it made at the end of last week. On the other hand, the US dollar and other currencies considered anchors of stability rose significantly. The euro had fallen to 1.1291 US dollars in Forex trading, thus reaching a two-week low. Most recently, the common currency was quoted at 1.1310 dollars. 

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Oil prices retreated further as well, with Brent oil costing 0.4 per cent less per barrel at $86.82, while WTI fell 0.45 per cent to $83.69.

Gold, the number one “safe haven”, was in demand most of the time given the general risk aversion. In the evening, the troy ounce cost 1,838 dollars.

The cryptocurrency market went in tandem with the traditional markets again and suffered heavy losses. Bitcoin, at times, dropped below $33,000 but was able to recover and closed almost unchanged at $36,300. On the other hand, altcoins remained in deep-red territory. Ethereum shed 3.4 per cent to $2,400, while Cardano and Solana dropped almost 5 per cent to $1.05 and $89, respectively. XRP lost 3 per cent to $0.60.

Corporate and world economic news

Economic data

Growth in the German economy accelerated in January, contrary to expectations. IHS Markit’s composite index for production in the private sector – industry and service providers combined – improved to 54.3 from 49.9 points in the previous month, according to data in the first release for the month. 

Growth in the eurozone slowed for the second month in a row in January. The composite index for production in the private sector – industry and services combined – fell to 52.4 points from 53.3 in the previous month, the IHS Markit Institute reported in its first release. Economists had predicted a decline to 52.7 points.

Economic activity in the USA weakened in December. According to the Federal Reserve Bank of Chicago, the Chicago Fed National Activity Index (CFNAI) fell to minus 0.15 points. For November, the index reading was revised to plus 0.44 after initially citing a value of plus 0.37.

The activity in the US economy slowed noticeably in January. The composite index for production in the private sector – industry and services combined – compiled by IHS Markit fell to 50.8 from 57.0 points in the previous month. The purchasing managers’ index for the manufacturing sector eased to 55.0 from 57.7 points a month earlier. This is the lowest level in 15 months. The index for the service sector declined to 50.9 from 57.6 points. This is the lowest level in 18 months.

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