December 7, 2022

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LIVE MARKETS Worst week since COVID-19 crash?

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WORST WEEK SINCE COVID-19 CRASH? (0833 GMT)

Well, we’re not there yet for the STOXX 600. But we’re getting pretty close.

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The pan-European index is down about 1.2% at 431 points – a level not tested since May 2021 – and is set for a weekly loss of 4.7%.

The weekly loss would have to extend to over 5.5% to bring us back to the mayhem of the COVID-19, March 2020 crash but for some sectors, we’re actually already there.

Autos and parts are losing 2.6% this morning and on course for a whopping 15% plunge this week.

Same goes for euro zone banks which start the day down 1.9% and set for a weekly loss of 13.3%.

Retail, which got less media attention than lenders, is also on its worst week since the pandemic start with a fall of over 10%.

Among the others sectors which will be cheering ‘TGIF’ is Travel & Leisure, with a 10%+ drop these last five days.

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(Julien Ponthus)

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A WEEK OF WAR (0757 GMT)

A fire at a training building near the largest nuclear power plant in Europe during intense fighting between Russian and Ukrainian forces has been extinguished, but markets globally were left on edge on Friday. read more

Stock markets across Asia were a sea of red, with MSCI’s gauge of stocks outside Japan hitting a 16-month low (.MIAPJ0000PUS) and Japan’s Nikkei down 2.2% (.N225).

European stock futures are sharply lower and Wall Street, when it opens later, looks set to join the selloff. MSCI’s global equity benchmark is on track for a fourth straight week of losses (.MIWD00000PUS).

Also, watch the euro, which has been dealt another blow by latest developments in Ukraine.

The single currency has shed almost half a percent and hit its lowest since May 2020 at $1.1010 . It has lost over 2% this week and is set for its worst week since April 2020.

For some, a move to parity — a word not used for some time — versus the dollar, could be on the cards. As currency weakness adds the inflation headache, it may be time to watch how the European Central Bank responds to currency weakness read more .

Note some economists reckon headline inflation in the euro area could top 6% this year. The ECB’s target is 2%.

U.S. payrolls data — usually the top focus for markets — almost appears to have faded to the background with markets gripped by the war in Ukraine.

Economists polled by Reuters forecast the U.S. economy created 400,000 jobs last month, after a 467,000 gain in January. That would leave employment 2.5 million jobs below its pre-pandemic level. read more

All the lost jobs are expected to be recouped this year, but the war in Ukraine could hurt business confidence and slow job growth in the months ahead.

The Federal Reserve, which looks set to start its rates lift off later in March, will be watching the labour market closely.

FED

Key developments that should provide more direction to markets on Friday:

– IAEA says ‘essential’ parts of Ukraine nuclear plant not affected read more

– Oil rebounds as escalating Ukraine conflict hits supplies read more

-Nike, IKEA close Russian stores as sanctions, trade restrictions bite read more

– German trade/current account

– Euro zone retail sales

– U.S. non-farm payrolls

(Dhara Ranasinghe)

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WATCH THE EURO (0727 GMT)

One key move to watch for in the upcoming session will be whether the euro holds the $1.10 line as the Ukraine crisis continues to worsen.

The common currency is currently losing 0.5% at $1.1010 and set for its worst week versus the dollar in nearly two years.

The yield of Germany’s bund has also just dipped back into negative territory as investors look for safe havens to park cash.

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(Julien Ponthus)

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HEADING TO MAY 2021 LOWS (0659 GMT)

If futures are to be trusted about the mood across markets this morning, it’s more than likely that European equity will open around March 2021 lows.

Indeed, a 2% fall in the STOXX 600 would take the pan-European index down to levels unseen in about a year.

The derivatives are trading about 2% and truth be said, there’s little to be optimistic before cash trading kicks off in an hour.

A fire and intense fighting around the largest nuclear power plant in Europe is not the kind of news traders are accustomed to wake up to as Russia’s invasion of Ukraine continues to rattle investors’ nerves.

(Julien Ponthus)

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