With just one session left to close the first month of 2022, international stocks experienced the worst January since the 2008 stock market crisis with the MSCI 50 global index losing 8%.
The main feature of January was the intense volatility with sharp fluctuations that, according to analysts, seem to continue in the coming months. The technology that has gone to negative ground on both sides of the Atlantic is a big loser amid concerns about the size and frequency of interest rate hikes by the Federal Reserve.
European tech stocks fell 20% from a 21-year high in November and more than 15% in January, along with the Nasdaq high-tech index in the US, which also had its worst monthly performance in more than 13 years.
Global tech stocks came under heavy pressure as investors were reluctant to pay high gains on growth stocks amid rising bond yields and the Fed’s plans to start raising interest rates in March to tame inflation. At the same time, escalating tensions between Russia and the United States over Ukraine have pushed investors to safer assets, such as the dollar, which has been in full swing since January.
“Growing bond yields and steady economic growth will continue to support value stocks versus growth stocks,” notes Morgan Stanley.
Europe in “red” in today’s sitting
The general pan-European STOXX 600 index fell for the fourth consecutive week, with losses driven by technology and the auto industry, closing today’s session with a fall of 1%, but earlier it had reached 2%. On a weekly basis, the index lost 1.8% of its value, the worst performance in two months, while in January it experienced the worst monthly decline since October 2020.
The technology sector fell in today’s session by 1.7%, while the automotive industry recorded losses of 1.8%.
The German economy, according to preliminary data, ran at a rate of 2.8% over the whole of last year, when today’s respective announcements for the French economy and that of Spain, showed that they recorded the best performance, the first in 52 years, the and second in 21.
Pressures on bonds as well
Meanwhile, worries about a more aggressive monetary policy by the Federal Reserve continued to fuel rising yields. The German 10-year yield jumped to -0.008% at the beginning of the week, to close at -0.02%, the biggest daily gain in two weeks, following the upward trend of the Americans on the other side of the Atlantic. where the 10 year moved to 1.85%.
In the Eurozone, while initially the Italian performances showed even more intense pressures, they managed to “take a breath” towards the end of the session, as the latest statistics in the USA showed a restraint of inflationary pressures. The Italian 10-year yield initially strengthened eight basis points to 1.44% to close at 1.38%, with the spread reaching 144 basis points, slightly lower than the 16-month high of 150 basis points, which it reached the week.
In the Greek government debt market, the yield of the old 10 years was 1.70%, while the new bond maturing in 2032 moved to 1.87%, with the spread consistently at 190 basis points. In the five years, the yield increased to 0.76%.
The image on Wall Street
Despite the fact that at the opening of the session, US stocks were synchronized with European stocks, the three key stock indices returned to positive territory in a very “familiar pattern” that follows the last sessions, amid sharp fluctuations. The Dow Jones industrial average was up 0.33%, the S&P 500 was up more than 1% and the Nasdaq was up 1.74%.
However, according to current data, January is the worst month since March 2020 for the S&P 500. With its initial losses, it is on the verge of entering a correction phase, ie it has lost at least 10% of its last record high. record.
The situation is worse for the Nasdaq, as its losses from its own high record reach 18% and is very close to entering a bear market (losses of 20% or more from the last record high).
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