Already weakened the previous week, the European stock markets unscrewed on Monday while Wall Street in extremis, pulled out of the game in the face of Russian-American tensions in Ukraine, on the eve of a meeting of the American Federal Reserve.
Europe fell in all directions: Paris (-4%), Frankfurt (-3.8%), Milan (-4%) and London (-2.6%). The Nordic stock markets also fell in Stockholm -3.9%, Copenhagen -3.5%, Helsinki -4.4% and Oslo -3.5%.
In New York, Wall Street was on course for its worst January in history, with the Dow Jones down 3% and the Nasdaq down 5%, when an hour before the close investors are income en masse to buy on the downside. The Dow Jones thus ended up 0.3%. The tech-heavy Nasdaq advanced 0.6% and the S&P 500 0.3%.
In Toronto, the S&P/TSX Composite Index closed down 50.09 points at 20,571.30, but was down more than 700 points earlier in the session. At its trough on Monday, the Toronto floor showed a decline of 7.6% from its most recent peak, which represented its worst fall since the start of the pandemic.
All 11 sectors on the TSX were down for most of the day, but the Information Technology, Consumer Staples, Consumer Discretionary and Healthcare sectors still ended Monday’s session higher. positive note. The technology sector advanced 1.8%. The energy group, for its part, suffered the biggest setback, retreating 1.5%.
“Increased geopolitical risk is adding to investor anxiety and weighing on risky assets,” especially commodity-related stocks, said Oanda analyst Craig Erlam. “The week could be decisive for the markets, with the US Federal Reserve meeting on Wednesday, the big technology results and the continued tensions on the border between Ukraine and Russia,” he continues.
NATO said it was placing forces on standby and sending ships and fighter jets to bolster its defenses in Eastern Europe amid fears of a Russian invasion of Ukraine.
Flying to the aid of the financial markets, the Russian Central Bank announced the suspension of the purchase of foreign currencies, after a significant fall in the stock market indices of the country and the price of the ruble.
Rate hike
The American Central Bank (Fed) is preparing for its part to raise its key rates to fight against soaring prices, and will decide, during its meeting on Tuesday and Wednesday, the pace and extent of the movement.
On Wall Street, the last hour rally for the indices “shows that the market was oversold”, commented Karl Haeling of LBBW. Many flagship stocks fell in session to their lowest level of the year, such as Twitter, which lost more than 7% before ending positive 0.7% at $35.06. “That’s basically why the market rebounded,” said Karl Haeling. “We had exhausted the sales but I’m not entirely sure that we have reached a bottom”, he indicated, estimating that the New York Stock Exchange should react “strongly in one direction or in the another after the Fed” on Wednesday.
A sudden flash
Ahead of the late rally, investment strategist Angelo Kourkafas of the firm Edward Jones described the day as a “sudden flash”. “We saw some pretty indiscriminate selling and some panic, which is usually the type of condition that marks a short-term bottom or support. We’ll see if that happens,” he said in an interview.
Investment sentiment has deteriorated in recent months in anticipation of a policy shift by central banks towards monetary tightening and interest rate hikes to fight inflation, after using stimulus measures to combat the effects of the COVID-19 pandemic.
The US Federal Reserve and the Bank of Canada are expected to unveil at least part of their plan in this regard on Wednesday.
While corporate financial results for the fourth quarter have so far generally exceeded expectations, concerns about margins and the outlook, first by U.S. banks, have introduced some caution that profitability will be affected by labor and other expenses, Kourkafas explained.
With The Canadian Press