Examining European and international markets
Soccer fans in Europe and other continents were treated to an amazing World Cup final on Sunday. As Lionel Messi led Argentina to a victory over France. In a penalty shootout amid great emotion and dramatic play. With investors bracing themselves for interest rate increases by the world’s leading central banks. And making peace with modest economic growth, there is no drama on the global markets.
On Monday, Asian markets slightly declined. Dampening holiday happiness, as the yen gained strength. This in anticipation of a potential announcement by the Japanese government of a more accommodating inflation target.
The final full trading week of 2022 got off to a shaky start on Asian stock markets as worries about future interest rate increases dampened holiday cheer. Rate increases were announced by the Europe Central Bank and the U.S. Federal Reserve last week, and there is even growing talk that the Bank of Japan, which meets on Monday and Tuesday, may be considering a change from its current ultra-dovish attitude.
Jerome Powell, the head of the Federal Reserve, stated last week that the Fed will continue to raise interest rates in 2019 despite the economy possibly entering a recession. And even if the European Central Bank slowed the rate at which it raised interest rates, it emphasized that further tightening was still to come as it battled rogue inflation.
All of this implies that even if 2022 is shaping up to be one of the worst years for a variety of asset classes, from equities to U.S. Treasuries, few people are placing their bets on a significant comeback in 2019.
Rate rises are a permanent feature of Europe
Klaas Knot, a member of the ECB’s governing council, stated that although the central bank would eventually raise interest rates more slowly than the Fed, it won’t reach the same level as its American counterpart. The major index in Britain also suffered its largest weekly drop of 1.3% in two months, while European equities suffered losses of 3.3% last week, the worst since September.
In business news, the CEO of Uniper, which has so far been the biggest victim of Europe’s energy crisis, urged shareholders to support Berlin’s proposed bailout, which will cost more than 50 billion euros ($53 billion), or else risk losing everything. Finally, on Sunday, Twitter CEO Musk posted a poll on the social media site asking users if they thought he should stand down as the company’s CEO. Musk also promised to follow the poll’s results.
