Aurelia Butler

LONDON/SINGAPORE (Reuters) – World stocks were steady and U.S. stock index futures indicated a lower open on Wall Street on the last trading day of 2022, but equities are on course for a 20% drop over a year marred by high inflation and war in Europe.The dollar, a beneficiary of rising U.S. interest rates, was on track for its best annual performance in seven years. The Federal Reserve and other central banks have been raising rates to fight inflation in the face of supply chain issues and an energy crisis due to the COVID-19 pandemic and oil producer Russia’s invasion of Ukraine.”This has been very much a Fed-driven equity market throughout the year,” said David Bizer, managing partner at investment manager Global Customized Wealth. “The market has been trying to anticipate when the Fed is going to hike, how fast and how far.”S&P 500 futures weakened 0.3% after U.S. stocks jumped 1-2.5% on Thursday, buoyed by data showing rising U.S. jobless claims.The data suggested Fed hikes might be starting to cool demand for labour. Markets anticipate the fed funds rate peaking near 5% in the middle of next year, from the current 4.25-4.5%.The Fed has raised rates by a total 425 basis points since March.The Dow Jones index is heading for an 8.5% drop on the year, while the S&P 500 is eyeing a 19% fall.European stocks fell 0.6% as surging COVID-19 cases in China stoked concerns over global economic growth, and were on course for their worst annual performance since 2018.Britain’s FTSE 100, which houses several exporters, was down 0.4% but was bound for a 1.5% rise in 2022. MSCI’s world equity index was heading for a 20% fall, its largest annual drop since the global financial crisis of 2008, when it slid more than 40%.MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%, but is set to end the year down 19%, its worst performance since 2008.Japan’s Nikkei was unchanged on the day, down 11% on the year.China’s blue-chip CSI 300 Index was up 0.4% on the day but down 22% on the year, while Hong Kong’s Hang Seng Index rose 0.2% on the day but fell 16% in 2022.Chinese leaders have pledged to step up policy adjustments to cushion the impact on businesses and consumers from a surge in COVID-19 infections. China’s health system has been under stress due to soaring cases since the country started dismantling its “zero-COVID” policy at the start of the month, with Spain and Malaysia on Friday joining countries imposing or considering imposing curbs on travellers from China. The dollar index, which measures the greenback against six major currencies, fell 0.4% to a two-week low. The dollar has gained more than 8% over the year, but it lost more than 7% this quarter on expectations the Fed may not raise rates as high as previously feared.Sterling was set for its worst performance against the dollar since 2016, when Britain voted to leave the European Union. It was last at $1.2052, unchanged on the day but down 11% on the year.The Japanese yen strengthened by around 1% to a 10-day high of 131.57 per dollar, but for 2022, the Bank of Japan’s ultra-dovish policy has pushed it to its worst performance since 2013. The euro gained 0.15% to $1.0677, but was eyeing a 6% fall on the year. Investors are worried that central banks’ efforts to tame inflation could lead to an economic slowdown. “Recession, inflation, stagflation will likely dominate headlines next year,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. Going into 2023, investors will also be wary of geo-political tensions arising from the war in Ukraine and diplomatic strains over Taiwan, analysts said.U.S. Treasuries and German bonds, the benchmarks of global borrowing markets, lost 16% and 24% respectively in dollar terms this year as rates rose.Ten-year U.S. Treasury yields gained 2 basis point to 3.85% on Friday.Ten-year German Bund yields rose 4 bps to 2.51% and two-year yields hit their highest since 2008 after data showing Spanish core inflation rose in December. U.S. crude fell 0.13% to $78.36 per barrel and Brent was flat at $83.49.Brent looked set to end the year with a gain of 7%, after jumping 50.2% in 2021. U.S. crude was on track for a 4.1% rise in 2022, following a 55% gain last year. [O/R]Spot gold rose 0.25% to $1,819 per ounce, though the non-yielding commodity was heading for a 0.5% fall on the year. More

However, outflows were capped by a Commerce Department report that showed U.S. consumer spending barely rose in November, while inflation cooled further.According to Refinitiv Lipper data, investors withdrew a net $529 million from global equity funds, although that was down from $39.1 billion the previous week. Graphic: Fund flows: Global equities bonds and money market – https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjjzawpx/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg U.S. equity funds recorded a net $5.41 billion worth of outflows but Asian and European funds attracted a net $1.66 billion and $460 million respectively.Among equity sector funds, tech, financials and industrials saw net selling of $835 million, $468 million and $192 million respectively. Graphic: Fund flows: Global equity sector funds – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjkkdjnpr/Fund%20flows-%20Global%20equity%20sector%20funds.jpg Meanwhile, a net $3.35 billion was withdrawn from bond funds, markedly lower than the $15.06 billion of outflows in the previous week.Short- and mid-term bond funds experienced their 19th straight week of outflows, at $1.59 billion, while high yield bond funds lost a net $179 million. Graphic: Global bond fund flows in the week ended Dec. 28 – https://fingfx.thomsonreuters.com/gfx/mkt/gkvlwwyjjpb/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Dec%2028.jpg Investors purchased lower risk money market funds worth a net $14.18 billion and parked $814 million in government bond funds in a eighth straight week of net buying.Data for commodity funds showed precious metal funds attracting a second straight week of inflows at a net $330 million, while energy funds recorded a net outflow of $247 million as selling continued from the previous week. According to data available for 24,668 emerging market (EM) funds, both equity and bond funds saw net weekly outflows, amounting $344 million and $97 million, respectively. Graphic: Fund flows: EM equities and bonds – https://fingfx.thomsonreuters.com/gfx/mkt/myvmooljbvr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg More

LONDON (Reuters) – Trillions of dollars wiped off world stocks, bond market tantrums, whip-sawing currency and commodities and the collapse of a few crypto empires – 2022 has been perhaps the most turbulent year investors have ever seen, and for good reason.Tallying the final numbers is useful but doesn’t even come close to telling the whole story.Yes, global equities are down $14 trillion and heading for their second worst year on record, but there have been nearly 300 interest rate hikes and a trio of 10%-plus rallies in that time making the volatility freakish.The main drivers have been the war in Ukraine, combined with rampant inflation as global economies broke out of the pandemic, but China remained shackled by it.U.S. Treasuries and German bonds, the benchmarks of global borrowing markets and traditional go-to assets in troubled times, lost 16% and 24% respectively in dollar terms.DoubleLine Capital’s Jeffery Gundlach, dubbed the ‘Bond King’ in the markets, says conditions got so ugly at points that his team found it almost impossible to trade for days at a time. “There has been a buyer’s strike,” he said. “And understandably so because prices have just been going down until recently.” Graphic: Seismic shifts – https://www.reuters.com/graphics/GLOBAL-MARKETS/egpbyyqjdvq/chart.gif Drama kicked in as soon as it became clear that COVID was not going to shutter the global economy again and the world’s most influential central bank, the U.S. Federal Reserve, was serious about raising interest rates.Ten-year Treasury yields jumped to 1.8% from less than 1.5%, knocking 5% off MSCI’s world stocks index in January alone.That yield is now at 3.68%, stocks are down 20% while oil prices surged 80% before giving it all up. The Fed has delivered 400bps of hikes and the European Central Bank a record 250bps, despite saying this time last year it was unlikely to budge.The dollar has risen almost 9% against the main world currencies, and 12.5% against the Japanese yen even after a last minute Bank of Japan surprise this week gave the yen a lift.In emerging markets, Turkey’s inflation and monetary policy problems have cost the lira another 28%, but its stock market is the best performer in the world. Hard-pressed Egypt devalued its currency more than 36%. Ghana’s cedi crashed 60% as it has joined Sri Lanka in default. Despite being well down from its June highs, Russia’s rouble is still the world’s second-best performing currency supported by Moscow’s capital controls. It was initially smashed after the invasion of Ukraine. Graphic: Dollar strength dominates FX markets – https://www.reuters.com/graphics/GLOBAL-MARKETS/zdpxddkarpx/chart.png “If you ask me what will happen next year I really couldn’t tell you,” said Close Brothers Asset Management’s Chief Investment Officer Robert Alster, who, like many, also pointed to the pummeling the pound and British bond markets took when the short-lived government of Liz Truss flirted with an unfunded spending splurge.Ten-year gilt yields soared over 100 bps and the pound lost 9% in a matter of days – moves the scale of which are rare in major markets. “If you sell it wrong, don’t be surprised if it goes down like a cup of cold sick,” said veteran CMC Markets’ analyst Michael Hewson. TECH PROBLEMSThe surge in rates has also taken $3.6 trillion off the tech titans. Facebook (NASDAQ:META) and Tesla (NASDAQ:TSLA) have both hemorrhaged more than 60% while Alphabet (NASDAQ:GOOGL)’s Google and Amazon (NASDAQ:AMZN) are respectively down 40% and 50%.Chinese stocks have staged a late rally thanks to signs that its zero-COVID policy’s days are numbered but they are still down 25% and emerging market ‘hard currency’ government debt will notch its first ever back-to-back loss. Graphic: $14 trillion wiped of value of world stocks – https://fingfx.thomsonreuters.com/gfx/mkt/znvnbbqdbvl/Pasted%20image%201671611348378.png Initial public offerings and bond sales have also slumped almost everywhere apart from the Middle East, while commodities have been the best performing asset class for a second consecutive year.Natural gas’ more than 50% rise is the best overall in that group, albeit largely due to the war in Ukraine which had hoisted prices 140% at one point.Mounting recession worries along with the West’s plan to stop buying Russian oil mean Brent has given back the entire 80% it made in the first quarter, as have wheat and corn. Graphic: The prices of war – https://fingfx.thomsonreuters.com/gfx/mkt/lgvdkkzjmpo/Pasted%20image%201672392863703.png The cryptomarket has been even more chaotic. Bitcoin ends 2022 robbed of its cocktail of cheap money and leveraged bets.The pre-eminent cryptocurrency has lost 60% of its value, while the wider crypto market has shrunk by $1.4 trillion, squashed by the collapse of Sam Bankman-Fried’s FTX empire, Celsius and supposed ‘stablecoins’ terraUSD and Luna.”What has gone in global markets this year has been traumatic,” said EFG Bank Chief Economist and ex-Deputy Governor of Ireland’s central bank, Stefan Gerlach. “But if central banks hadn’t underestimated the rise in inflation so dramatically and had to jack up interest rates, it wouldn’t have been so catastrophic”. Graphic: A dramatic year for global markets – https://www.reuters.com/graphics/GLOBAL-MARKETS/lgvdkkajzpo/chart.png More

Harland & Wolff, the owner of the historic Belfast shipyard, has warned that its revenues for the full year will be “materially below” previous expectations after supply chain constraints and inflationary pressures led to the deferral of work on a number of contracts. The company said in a trading update on Friday that it expected to generate revenues of between £29mn and £31mn for the full year to the end of December 2022 — significantly below expectations of between £65mn and £75mn. Shares in the Aim-listed group plunged 23 per cent on Friday morning, before recovering to 16p by midday. H&W said material shortages had affected its ability to complete “certain key workstreams” of a £55mn contract to regenerate a former Royal Navy minehunting vessel for the Lithuanian navy. As a result, about £20mn in revenues would be deferred. “Whilst it is unfortunate that the company could not advance these workstreams to book revenues in 2022, the overall project is still on track and in line with the base redelivery schedule for the vessel,” H&W said. H&W also said geopolitical uncertainties and global inflation had caused “certain other clients” within the cruise and ferry market to either defer contracts into 2023 or reduce the scope of works. The estimated loss of revenues for the fourth quarter from these contracts was between £8mn and £10mn. The company stressed, however, that it remained confident that the bulk of the revenues that had been expected would be booked during the course of the first six months of 2023. H&W also said that it had mutually agreed with Italian contractor Saipem to terminate a wind turbine generator jacket contract after being unable to agree on a “mutually acceptable methodology” on how to split additional costs. John Wood, H&W chief executive, conceded that it was “disappointing” that the company had not met its “aspirations for FY 2022 due to timing issues”, while adding that it had “made significant progress over the last 12 months”.“Despite the external challenges that we face, I believe that we are now at the cusp of a major transformation of the entire group and the team is working hard to convert bids into contracts,” he added. The company is finalising negotiations in relation to a £1.6bn contract with the UK Ministry of Defence to build three support vessels for the Royal Navy.The ships will be built by a consortium led by Spain’s Navantia and which includes naval architect BMT. Navantia UK, the British subsidiary of the Spanish shipbuilder, is the official prime contractor of the consortium. The involvement of the Spanish company has sparked concerns among unions and opposition politicians that work will migrate to Spain. H&W said on Friday that as a result of the contract award, as well as a review of the “potential contracted order book for 2023 and 2024”, it was in talks to increase an existing debt facility with Astra Asset Management to between £150mn and £200mn.“As the company executes larger contracts, it believes that it is crucial to maintain a significant quantum of liquidity with a larger committed facility that can be drawn down as and when needed,” it added. More