Stocks perform worst in years in 2022 – RTE.ie

Stocks perform worst in years in 2022 - RTE.ie

Stock markets tonight posted their worst performance in years before entering 2023 amid fears of a recession following the Russian invasion of Ukraine, high inflation and rising interest rates.

European indices ended their last sessions of the year in the red. For the year Frankfurt fell more than 12% and Paris lost 9.5% for their worst performance since 2018.

However, London rose 0.9% in 2022 as the energy sector was supported by rising energy prices.

US stocks also ended lower tonight for 2022, capping a year of sharp losses on aggressive rate hikes to curb inflation, fears of a recession, the war between Russia and Ukraine and rising concerns over Covid cases in China.

Wall Street’s three main indices posted their first annual decline since 2018 as an era of loose monetary policy ended with the fastest pace of rate hikes by the Federal Reserve since the 1980s.

The benchmark S&P 500 is down 19.4% this year, representing a drop in market capitalization of about $8 trillion. The tech-heavy Nasdaq is down 33.1%, while the Dow Jones is down 8.9%.

The annual percentage declines for all three indices were the largest since the 2008 financial crisis, driven largely by a decline in growth stocks as concerns about the Fed’s rapid rate hikes pushed up US Treasury yields.

The Dow Jones fell 73 points (0.2%) to finish tonight at 33,147, while the S&P 500 lost nine points (0.25%) to finish at 3,839 and the Nasdaq Composite lost 11 points (0.1%) to close at 10,466.

Global equities took a beating as the US Federal Reserve, the European Central Bank and the Bank of England aggressively raised interest rates in an attempt to deal with rampant consumer price increases. The move carries the risk of a recession as higher borrowing costs slow down economic activity.

US tech companies were particularly hard hit, as they are usually boosted by lower interest rates.

The MCSI World Equity Index lost nearly a fifth of its worst annual performance since 2008, when markets were ravaged by the global financial crisis.

Asia-Pacific markets ended their latest sessions largely in the green today. But for the year, Hong Kong fell 15.5% and Shanghai 15.1% in the biggest annual slumps since 2011 and 2018, respectively.

Covid spiked again in China in December after Beijing eased its strict curbs despite rare public outcry. That also led to concerns about the impact on stretched global supply chains.

Tokyo plummeted 9.4% in its first annual decline since 2018, but the Bank of Japan, unlike other central banks, maintained its ultra-loose monetary policy to help its fragile economy.

“It’s going to be a sad end to a miserable year in the stock markets,” Craig Erlam, analyst at the OANDA trading platform, told AFP.

He said 2022 had “ended an era” of low interest rates that fueled the rise of technology and crypto.

“That has been replaced by rising inflation and interest rates, immense economic uncertainty and the reform of energy markets in the wake of the Russian invasion of Ukraine,” Erlam said.

In commodities, oil prices rose in 2022, with Brent gaining 7.5% and New York crude gaining 4.2%.

However, they remain 40% below the peaks reached in March due to supply problems after main producer Russia invaded its neighbour, which also drove up natural gas prices.

Britain and other major economies now face the likely prospect of grim recessions next year as consumers and businesses contend with rampant inflation and rising rates after years of ultra-low borrowing costs.

“The main takeaway of the year is: The era of easy money has ended and it is over for good,” noted SwissQuote analyst Ipek Ozkardeskaya.

“And given that there is still plenty of cheap central bank liquidity waiting to be withdrawn, the situation may not get better before it gets worse,” she said.

“Recession, inflation and stagflation are likely to dominate the headlines next year.”

London fell 0.8% lower and Frankfurt lost 1% in half-day sessions ahead of the New Year holiday. Paris closed 1.5% lower. The Dublin market closed tonight with losses of 0.9%.

“It seems like people have checked out for the year — and got back into holiday mode for New Year’s celebrations,” Erlam said.

Leave a Reply