Global markets struggle to put last year’s misery behind them

By Anna Cooban, CNN

European and Asian stocks rose on the first big trading day of 2023 as investors tried to look beyond a gloomy outlook for the world economy, China’s worst Covid outbreak and stubbornly high inflation in Europe.

But after a positive start, Wall Street again fell prey to fear. The S&P 500 gained 0.4% in early trading Tuesday, while the Nasdaq Composite rose 0.8%. By midday, however, both indexes were weaker, down 0.3% and 1.2%, respectively.

Tesla shares fell 13% after the electric car giant reported weaker-than-expected fourth-quarter global sales. Apple fell 3.8 percent and its market capitalization reached 2 trillion dollars. An impressive number, to be sure, but about $1 trillion less than it was worth at this time last year.

The European Stoxx 600 index rose 1.2% as of 12:10 p.m. ET, down from earlier highs, but extended strong gains on Monday as Chinese and U.S. markets closed. Germany’s DAX rose 0.8%, while France’s CAC rose 0.4%.

US markets are awaiting the first major economic news of the year, which is due later this week. A key report on manufacturing, new data on the opening of the labor market and minutes from the Federal Reserve’s latest meeting are out on Wednesday. The jobs report for December will be published on Friday.

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Investors in Europe They were buoyed by survey data, released Monday, which showed that supply chain and inflationary pressures are easing somewhat for manufacturers in economies that use the euro currency.

According to data published by the Institute for Economic Research (Ifo) on Tuesday, parts shortages have also eased in Germany, Europe’s largest economy. Inflation is decreasing in the country. Data released Tuesday by the German Federal Statistics Office showed that consumer prices rose 8.6% in December, compared to 10% the previous month, and 10.4% in October.

London’s FTSE 100 index rose 2.3 percent. in morning trading, to settle 1.4% higher before easing slightly.

Holger Schmieding, chief economist at Berenberg bank, struck a cautiously optimistic note about the coming year.

“Unless a new geopolitical shock intervenes, the new year is likely to be much less volatile than 2022. For Europe in particular, the outlook continues to be substantially less negative,” he wrote in a Tuesday note.

In Asia, markets ended the day firmly in positive territory, recovering from early losses.

Hong Kong’s Hang Seng index fell as much as 2% after a closely watched private survey showed China’s economy ended last year with a slump in factory activity. But the index soon reversed course to gain as much as 1.8% on hopes of reopening the city’s border with mainland China on January 8. increased stock.

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Companies in mainland China were also on the first day of trading. The Shanghai Composite opened lower, but later pared losses to close 0.9% higher.

Still awake

Tuesday’s market gains provide good news for investors after a volatile 2022 that saw $33 trillion wiped from global equity markets.

Many suffered deep losses in 2022 as central banks raised interest rates at an unprecedented clip in a bid to control high inflation.

The S&P 500 has lost 19.4% over the past 12 months — its worst year since 2008 — despite hitting an all-time high last January. Europe’s Stoxx 600 index fell 12.9%, its biggest annual loss since 2018. Hong Kong’s Hang Seng fell 15.5%, its weakest performance since 2011.

Predicting the state of the markets is notoriously difficult – and often wrong – but it seems that many of last year’s economies Headwinds will stick around, and some may get even worse.

Kristalina Georgieva, head of the International Monetary Fund, warned in an interview with CBS that aired on Sunday that 2023 will be tougher on the global economy than 2022.

Georgieva said the world’s three largest economies, the United States, the European Union and China, were all “slowing down at the same time” and the IMF it is predicted that “a third of the world economy will be in recession” this year.

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“Almost everyone is going into 2023 with a healthy dose of horror,” Craig Erlam, senior market analyst at Oanda, said in a note on Tuesday.

“Growth is tepid and will remain so unless something important changes, whether it’s the war in Ukraine or inflation,” he said.

Investors can expect the world’s central banks to continue to raise interest rates to reduce historic levels of inflation, despite signs that global inflation has begun to cool, in part due to falling energy prices.

Both the European Central Bank and the US Federal Reserve have said they plan to keep borrowing costs low in the near future, a move that often hurts the profits of companies – and their investors.

China is also unpredictable. While investors are generally happy that the country abandoned its strict zero-Covid policy last month – promising to lift demand across the world’s second-largest economy – the number of cases and a potential contraction are rising in early 2023. can limit gains.

– Paul LaMonica, Julia Horowitz and Laura He contributed to the report.

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