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The Long and Short of it, week ending 04 November 2022

Posted: 08 November, 2022

Topic: Telecoms , Financials , Basic Materials , Energy , Industrials , Technology

Publication Type: Market Commentaries

Major stock market indexes fell last week as investors waited apprehensively for Wednesday’s FOMC rate decision and Friday’s employment report with concerns of an ever-aggressive Fed pushing stock prices lower every single day last week except for Friday. Wednesday’s as-expected FOMC decision raising rates 75bs initially drove stock markets higher as FOMC announcement language appeared to suggest the Fed was likely to adopt a slower pace of increases to discern and examine the effects of its previous rate hikes. Hopes of a “Fed pivot”, however, were severely diminished following Fed Chair Jerome Powell’s comments at his press conference held shortly after the rate hike announcement. Powell’s comments that the Fed had “a ways to go” before pausing rate hikes reversed index gains to sharp losses with the Nasdaq Composite Index faring the worst, finishing Wednesday down 3.4%. Stock markets continued lower Thursday, further processing Wednesday’s events and perhaps also affected by the BoE decision to raise rate 75bps. Friday’s employment report showing larger-than-expected gains in jobs but a higher-than-expected unemployment rate left markets somewhat uncertain with stock indexes fluctuating between losses and gains before finally ending higher on the day, the only up-day of the week. At week’s end, the S&P 500 Index fell 3.3% to 3,770.55, the Nasdaq Composite Index increased dropped 5.6% to 10,465.25, the Dow Jones Industrial Average decreased 1.4% to 32,404.80, the 10-year U.S. Treasury rate rose 15bps to 4.16% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) was practically unchanged

European stock markets moved higher last week with the FTSE 100 Index strongly outperforming the STOXX 600 Index. Hopes of a “Fed pivot” and reports – unsubstantiated - of a major change to China’s zero-covid policy helped move stock prices higher through Tuesday. Uncertainty surrounding the FOMC rate decision Wednesday moved both the STOXX 600 and FTSE 100 Indexes lower Wednesday while only the STOXX 600 Index fell Thursday reacting to Fed Chairman Jerome Powell’s press conference remarks Wednesday. A weaker British pound (versus the U.S. dollar) and higher metals and energy commodity prices buoyed the FTSE 100 Index as did the BoE’s pronouncement following its 75bps rate hike Thursday that borrowing costs would likely be lower than expected. Renewed reports China’s Covid policy would undergo major changes and a mixed U.S. employment report Friday pushed both indexes higher Friday. At week’s end the FTSE 100 Index rose 4.1% to 7,334.84, the STOXX 600 index increased 1.5% to 416.98, the 10-year UK government rate rose bps to 3.56%, the 10-year Bund rate increased 20bps to 2.29%, the British pound weakened 2.0% and the euro was unchanged both versus U.S. dollar.