Lower risk appetite in the last week of 2022 didn’t stop traders from buying the Japanese yen. However, the major US stock indices — the Dow Jones, Nasdaq, and S&P 500 — broke their three-year winning run to finish 2022 in the red.
Source: Bloomberg. Click to see full size.
Despite the lower risk appetite seen in the global markets over the last week, the Japanese yen was sought after. The demand for yen was fuelled by worries about the coronavirus outbreak in China and its effect on China’s economy. Plus, the unexpected asset purchases announced by the Bank of Japan also contributed to the demand for yen.
Across the Pacific, there were market rumblings of a possible resurgence by the US dollar, which never materialised as the EUR/USD pair was on a bullish trajectory. Given the difference in inflation rates between the US and the Eurozone, the European Central Bank (ECB) may decide to tighten its monetary policy more than the Federal Open Market Committee (FOMC) of the United States.
Meanwhile, a prevalence of risk aversion on the final trading day of 2022 meant that the pound sterling (GBP) reduced its losses relative to the US dollar. While Wall Street continued to lose money, the GBP/USD exchange rate remained within the expected range due to a lack of major market-moving developments over the course of last week.
On the events front, the first week of 2023 will see the release of the S&P Global/CIPS Manufacturing Purchasing Managers’ Index (PMI) data in the UK. Meanwhile, the S&P Global Manufacturing PMI, non-farm payrolls, and unemployment data will all be released in the United States.
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Source: Bloomberg. Click to see full size.
Nearly flat for the year, gold reached a high of $1,825 on Friday before receding. Although the bias is upward, gold prices are struggling to maintain the $1,820 level at the time of writing.
Last year was a tumultuous one for the precious metal. During the first half of 2022, its prices rose beyond $2,000 before plummeting to $1,615, from where they began a recovery that is still in progress.
On the other hand, although oil prices were volatile in 2022 due to the Ukraine war that disrupted global supplies, it turned out to be a second consecutive year of gains for the commodity.
Oil prices rose on Friday as traders closed out the year on a high note. In a decree issued last week, Russian President Vladimir Putin prohibited the supply of oil and related products for five months from February 1 to countries that abide by the Western-imposed price cap. The Group of Seven, or G7 nations, the European Union (EU), and Australia had imposed a USD60 a barrel cap on Russian crude from December 5 in response to the Russian military operation in Ukraine. As a result of the sanctions, Russia’s oil production may decline by 1.4 million barrels per day in 2023.
The cryptocurrencies market showed little signs of recovery, with most digital tokens trading in the red throughout the week. The global crypto market capitalisation stood at around the $810 billion mark on Sunday, 1 January.
According to statistics, the daily cryptocurrency trade volumes dropped notably in December 2022. As per the data collected on Sunday, January 1, assets worth $22.95 billion were traded over the previous 24 hours — significantly less than $54.78 billion that was traded over the same duration two weeks prior, on Sunday, 18 December 2022. The last time global cryptocurrency trade volumes were this low was exactly two years ago in December 2020.
The largest cryptocurrency by market capitalisation, Bitcoin, entered 2023 on a positive note as it witnessed a jump of 0.39% in its value. It was trading at $16,605 at the time of writing after reaching a high of $16,918 on Monday, 26 December. Ethereum, which follows behind Bitcoin as the second-most traded digital asset, was trading at $1,200.
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US stock markets
|Name of the index||Friday’s close||*Net change||*Net change (%)|
|Dow Jones Industrial Avg (Wall Street 30)||33,147.25||-56.68||-0.17|
|Nasdaq (US Tech 100)||10,939.76||-45.69||-0.42|
|S&P 500 (US 500)||3,839.50||-5.32||-0.14|
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.
The stock market ended 2022 with a thud as major US indices continued their bearish run. On the last trading day of 2022, the Dow Jones Industrial Average fell 0.17% to close at 33,147.25, the S&P 500 shed 0.14% to end at 3,839.50, and the Nasdaq Composite was down by 0.42% to finish the year at 10,939.76.
Overall, the three major US stock indices snapped out of a three-year winning streak, as they faced their worst year since the great recession of 2008. The Dow had the least losses in 2022, down about 8.8%. The S&P 500 sank 19.4%, more than double the losses of the Dow, while the tech-heavy Nasdaq dropped a whopping 33.1%.
The stock market has been influenced by geopolitical factors such as Russia’s invasion of Ukraine, tension between China and Taiwan, and the Covid pandemic across the globe. Furthermore, economic factors such as inflation and rising interest rates have been at the forefront of market movements.
The first week of 2023 will be marked by the release of the December jobs report in the United States as well as the readout of the US Federal Reserve’s December policy meeting, which will give clues about the central bank’s next move.
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