Weekly round up
Although UK markets managed to outperform many of their global peers, they were not immune to the global sell-off, with the FTSE 100 Index falling by 0.76% to end the week at 7,521 points at the time of writing.
Investors remain concerned about the impact of rising inflation and tighter monetary policy by major central banks on the slowing economic recovery. At the same time, tensions between the US and Russia continue to weigh on sentiment.
On the economic data front, British retail sales slumped 3.7% in December, a far bigger hit than the 0.6% decline forecasted by markets and the biggest fall since last January. Sales were down by 7.1% in non-food stores with falls in each sub-sector including department and clothing stores, other non-food stores and household stores.
Sales of fuel fell 4.7% as increased home working in December 2021 reduced travel and food store sales were down 1%. Retail sales were still 2.6% higher than in February 2020 when the Covid-19 pandemic began and considering the full year (2021), sales were up 5.1% since 2004.
In the commodity markets gold prices rose to near two-month highs around $1,833 an ounce on Friday, underpinned by inflation concerns, easing US bond yields and increased safe haven demand. Persistent price pressures pushed gold higher as annual inflation rates soared to multi-decade highs across major economies, headlined by the US consumer price index which accelerated to its fastest pace in almost 40 years at 7% in December.
Brent crude retreated below $87.5 per barrel on Friday after hitting a fresh seven-year high of $89.5 in the previous session, as an increase in crude and fuel stockpiles prompted investors to take profits from the rally. Oil prices have gained more than 10% so far this year as strong demand and supply constraints significantly tightened the market. Malaysian palm oil futures extended a five-week rally to hit a new record high of MYR 5,260 per tonne on the back of supply concerns.
US stocks closed lower on Thursday after keeping gains for most of the session as the rebound in tech stocks eased. The Dow Jones fell as much as 320 points after adding more then 450 points earlier while the S&P 500 dropped 1.1% and the Nasdaq Composite plunged 1.3% after booking gains of 2%.
The sell-off started after it was reported that Peloton Interactive Inc. was halting some production, dragging the company stocks to a 24% drop. In addition, investors remain concerned about the rise in borrowing costs despite treasury yields retreating for a second day from recent two-year highs.
US futures fell again on Friday, triggered after Netflix tumbled 20% in after-hours trading as the company’s fourth-quarter earnings report showed a slowdown in subscriber growth.
Overall, the selling pressure on technology stocks is the continuing theme on prospects of higher interest rates. On the economic data front, the number of Americans filing new claims for unemployment benefits rose by 55,000 from the previous period to 286,000 in the week ending January 15th. This was the highest level since mid-October and well above market expectations of 220,000.
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