Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are starting the new week on the back foot, as investors fret about looming interest rate rises and the Ukraine crisis.
Shares have dropped in many Asia-Pacific markets, after Wall Street ended last week with more losses. The S&P 500 fell 1.9% on Friday, as January continues to be one of the worst months for stocks since the pandemic began.
Global stocks have lost $4.2tn in mkt cap this week, most since Oct2020 on tech rout & as investors reacted to signs that growth may be slowing at some of Value stocks they had been rotating into earlier this year. Global stocks now worth 136% of global GDP down from 144% in Dec. pic.twitter.com/rRV9I5Fcze
— Holger Zschaepitz (@Schuldensuehner) January 23, 2022
Hong Kong’s Hang Seng index, and South Korea’s KOSPI, are both down 1.25% today, while India’s Sensex has lost 2%.
European stocks are expected to open lower too, as traders brace for a Federal Reserve meeting on Wednesday. The US central bank is likely to confirm it is on track to soon start raising borrowing costs and running down its balance sheet.
European Opening Calls:#FTSE 7479 -0.20%#DAX 15559 -0.29%#CAC 7049 -0.27%#AEX 760 -0.54%#MIB 26896 -0.61%#IBEX 8678 -0.20%#OMX 2301 -0.54%#SMI 12298 -0.46%#STOXX 4212 -0.41%#IGOpeningCall
*(Note, these are index opening % change , futures seeing broad risk-on moves).
— IGSquawk (@IGSquawk) January 24, 2022
As Oliver Allen, a market economist at Capital Economics, puts it:
“With inflation eye-wateringly high, the Fed is on course to steadily remove the ultra-accommodative monetary policy that has been a key prop to stock prices for over a decade now.”
There is also anxiety about the situation in Ukraine, after the US government ordered the families of all American personnel at its embassy in Ukraine to leave the country amid heightened fears of a Russian invasion.
Jim Reid of Deutsche Bank says:
Geopolitics doesn’t always impact markets even if they feel very tense and fraught. However the current Russia/Ukraine situation does seem to be adding to the risk off at the moment and merits close attention.
But Wall Street could claw back some of last week’s losses, at the start of a very busy week for company earnings – including Microsoft, Apple and Tesla.
Earnings releases for this week
(via @eWhispers) pic.twitter.com/5W837KzMOe
— Michael Goodwell (@MichaelGoodwell) January 23, 2022
Also coming up today
Some UK workers will be returning to the office today for the first time in weeks, as the Plan B Covid-19 restrictions are rolled back.
The latest ‘flash’ PMI surveys of firms in the UK, France, Germany and the wider eurozone will be released this morning.
They could show that the UK economy picked up in January, after Omicron hit in December, as Alvin Tan of Royal Bank of Canada explains:
The economic impact of the omicron variant is likely to have been relatively mild. Data for early January already point to some degree of recovery in restaurant bookings while card spending data has also shown signs of recovery.
The recovery along with expectation of restrictions being lifted should buoy the PMI survey, and we expect the January services PMI to strengthen to 54.8.
The agenda
- 9am GMT: Eurozone flash Purchasing Managers survey for January
- 9.30am GMT: UK flash Purchasing Managers survey for January
- 1.30pm GMT: Chicago Fed National Activity Index for December
- 2.45pm GMT: US flash Purchasing Managers survey for January
