Australian Market

Australia’s S&P/ASX 200 slipped 0.8% as investors again fretted about the possibility that central banks may raise interest rates further to tackle inflation. Tech and financials were among the biggest losers. The ASX 200 fell 0.9% for the week, marking its second straight weekly decline.

US Market 

Stocks fell again, with investors forced to wrestle anew with the prospect of higher-for-longer interest rates and the potential for recession. The S&P 500 dropped 1.1% a day after falling 2.5%. Each of the index’s 11 sectors finished in the red. The Dow Jones Industrial Average fell almost 0.9%. The technology-focused Nasdaq Composite slid 1%. All three major indexes fell at least 1.5% this week, with technology stocks and other growth-sensitive segments suffering the most.  

Investors who had been growing optimistic because of moderating inflation now find themselves worried about a slowdown in economic growth. Fresh services and manufacturing data added to those concerns. The central bank said Wednesday it planned to lift rates through the spring and to a higher level than previously forecast. Fed forecasts also suggested the central bank would hold rates at their peak until 2024, rattling some investors who had expected officials to begin cutting rates next year.  

“They’ve effectively raised the bar on the magnitude and pace by which inflation would have to fall to warrant…a true pivot where they would actually be cutting rates,” said Hani Redha, portfolio manager at PineBridge Investments. “That’s really bearish.”

Commodities

Gold futures ended higher after a volatile week that saw prices climb to a nearly six-month high but post a weekly decline, pressured by expectations for higher U.S. interest rates. February gold futures climbed 0.7% to settle at $1,800.20 per ounce on Comex, FactSet data show. Prices based on the most-active contract ended 0.6% lower for the week.

Interest rates have surged with the dollar, “reducing the appeal for gold as a nonyielding dollar hedge,” said Adrian Ash, director of research at BullionVault. Still, “this year’s resilience in bullion prices makes a stark contrast with the 2013 crash, and it also contrasts with the worst year in living memory for equity/bond portfolios,” he said.

Oil Futures

Oil futures settled lower, pressured after major central banks indicated interest rates will continue to rise and remain elevated next year, stoking fears of a global economic slowdown that could lead to lower energy demand. Prices, however, ended above the session’s worst levels, as the Energy Department said it would start to repurchase oil to refill the nation’s oil reserve. For the week, crude posted a solid gain, with support tied to optimism that China’s loosening of Covid-19 curbs will spark a rebound in demand from one of the world’s largest energy consumers.  

West Texas Intermediate crude for January delivery fell 2.4% to settle at $74.29 a barrel on the New York Mercantile Exchange. The U.S. benchmark logged a weekly gain of 4.6%, according to Dow Jones Market Data. February Brent crude was down 2.7% to settle at $79.04 a barrel on ICE Futures Europe. Brent saw a weekly gain of 3.9%. “Global central banks keep suggesting that they are going to win the war against inflation at any cost,” said Phil Flynn, senior market analyst at The Price Futures Group.

“One of the casualties the market fears could be a global recession that theoretically will reduce oil demand.” However, “the reality is that demand destruction based on a mild recession won’t be as bad as people think – if you add to that the reopening of China,” he said.

Forex

Major currencies were mostly weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0661 to session lows near US$1.0582 at the US close. The Aussie dollar dipped from highs near US67.18 cents to lows near US66.75 cents and was near US66.85 cents at the US close. But the Japanese yen firmed from near 137.37 yen per US dollar to JPY136.30 and was near JPY136.70 at the US close.

European Markets

European sharemarkets fell on Friday on investor concerns about rising borrowing costs and an economic slowdown. S&P Global’s flash Eurozone composite PMI rose from 47.8 to 48.8 in December (survey: 48), but activity shrank for a sixth straight month. The continent-wide FTSEurofirst 300 index slid 1.1% and was down 3.3% for the week. The UK FTSE 100 index shed 1.3%
on Friday after British retail sales fell by 0.4% in November (survey: +0.3%). The FTSE 100 lost 1.9% for the week.

Asian Markets

Earlier Friday, Chinese shares finished broadly lower, ending a six-week rally spurred by the country’s reopening. Hardware and software stocks weighed on the market. Property stocks outperformed after China’s vice premier said Beijing is considering more measures to support the embattled real-estate sector. The Shanghai Composite Index ended flat for the day, and lost 1.2% for the week. The Shenzhen Composite Index finished the session 0.7% lower, while the ChiNext Price Index shed 1.1%.

Hong Kong’s Hang Seng Index advanced 0.4%, outperforming regional markets, supported by Chinese property developers. The benchmark index lost 2.3% for the week. The Nikkei Stock Average fell 1.9%, dragged down by losses in electronics and tech stocks, as concerns grew about the global economic outlook amid policy tightening by central banks.