The Long and Short of it, week ending 18 Mar 2022
Posted:Volatility continued last week but this time with all three major U.S. stock indexes finishing significantly higher.
Uncertainty surrounding the FOMC announcement Wednesday and continued concerns regarding the war in Ukraine pushed markets lower Monday, the only down day of the week. Sharply falling oil prices (through Wednesday) and the FOMC decision to raise the Fed Funds target rate range to 0.25% - 0.50% boosted risk-on sentiment driving stock markets 1% - 2% higher each day the remainder of the week. The FOMC announcement Wednesday was deemed to hold no real surprises with the Fed holding off from increasing the Fed Funds target range by 50bps but indicating it may raise rates by 25bps in each of the remaining meetings this year while at some point beginning the process of reducing its balance sheet. Reports of progress in negotiations between the Ukraine and Russia earlier in the week faded as the week progressed and oil prices, down 12% through Wednesday, rallied sharply Thursday and Friday but nonetheless U.S. stock markets continued to rise, focusing more, instead, on the FOMC decision and announcement. The 10-year U.S. Treasury rate rose 16bps powered by a 23bp increase in real yields and a slight decline in 10-year inflation breakeven rates to 2.9%. The increase in real rates was more a result of falling haven-investment demand, however, than of the FOMC decision. For the week, the S&P 500 rose 6.2% to 4,463.09, the Nasdaq Composite Index jumped 8.2% to 13,892.84, the Dow Jones Industrial Average gained 5.5% to close at 34,749.36, the 10-year U.S. Treasury rate increased 16bp to 2.16% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) weakened 0.9%.
European stock markets performed well last week with the FTSE-100 Index recording its best week in over a year.
Reports of negotiation progress in the Russia -Ukraine war was a primary factor driving European stock markets higher with falling commodity prices also contributing. Expectations of another 25bps increase by the BoE, bolstered by a much better-than-expected UK unemployment rate, were realized Thursday with the BoE boosting rates another ¼ percent. The rate increase, however, was accompanied by dovish comments that economic growth could slow due to repercussions of the Russia-Ukraine conflict perhaps limiting the need for further rate increases. Reports of Chinese economic stimulus programs counteracted news of new Chinese Covid-19 related lockdowns, boosting stock prices as did Wednesday’s FOMC decision to increase rates 25bps. Increasing 13bps through Wednesday, the 10-year UK government rate finished the week unchanged while the 10-year Bund rate rose 10bps to finish the week at 0.37%. At week’s end, The FTSE 100 Index increased 3.5% to 7,404.73, the STOXX 600 Index rose 5.4% to 454.60, the 10-year UK government rate increased 1bps to 1.50% and the British pound and the Euro strengthened 1.1% and 1.3%, respectively, both with respect to the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Diageo (3LDO) | +35.1 % | -3x Glencore (3SGL) | +17.1% |
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The Long and Short of it, week ending 18 Mar 2022
