Business

Stocks stumble to end 'miserable' 2022

Roland Jackson - Agence France-Presse

December 31, 2022 | 10:26am

A trader reacts on the floor of the New York Stock Exchange at the closing bell on December 30, 2022 in New York. Wall Street stocks marked a gloomy end to 2022, slumping to close lower in their worst annual showing in years. Surging inflation and steep interest rate hikes to cool demand have battered markets and investor sentiment this year, on top of global shocks like Russia's invasion of Ukraine.

AFP / Timothy A. Clary

NEW YORK, United States — Stock markets wrapped up their worst performances in years on Friday before heading into 2023 under recession fears following Russia's invasion of Ukraine, high inflation and rising interest rates.

Both US and European indices closed their final sessions of the year in the red.

For the year, Frankfurt was down more than 12% and Paris lost 9.5% for their worst performances since 2018. London, however, was up 0.9% in 2022 as the energy sector was buoyed by soaring energy prices.

Wall Street saw its worst annual drop since 2008, with the S&P 500 index down around 20% and the tech-heavy Nasdaq losing about 30% for the year.

Equities were slammed as the US Federal Reserve, European Central Bank and Bank of England aggressively lifted interest rates in a bid to tackle rampant consumer price rises. The move carries the risk of sparking recession as higher borrowing costs slow economic activity.

US tech companies were hit particularly hard as they are usually boosted by lower interest rates.

The MCSI World Equity Index has lost almost a fifth in its worst annual performance since 2008, when markets were ravaged by the global financial crisis.

Asia-Pacific markets finished their last sessions mostly in the green on Friday.

But for the year, Hong Kong tanked 15.5% and Shanghai dived 15.1% in the biggest annual slumps since 2011 and 2018, respectively.

Covid spiked once more in China in December, after Beijing relaxed its strict curbs in the face of rare public outcry. The surge has also prompted worries about the impact on stretched global supply chains.

Tokyo plunged 9.4% in the first annual fall since 2018 but the Bank of Japan maintained its ultra-easy monetary policy, in contrast with other central banks, to help its fragile economy.

'Pitiful end to miserable year'

"It's shaping up to be a pitiful end to a miserable year in stock markets," OANDA trading platform analyst Craig Erlam told AFP.

He said 2022 had "brought an end to an era" of low interest rates that fueled tech and crypto booms.

"That's been replaced with soaring inflation and interest rates, immense economic uncertainty and the reshaping of energy markets in the aftermath of the Russian invasion of Ukraine," Erlam added.

In commodities, oil prices rallied in 2022 with Brent gaining about 10% and the West Texas Intermediate adding around 7%.

However, they remain significantly below peaks struck in March on supply woes after key producer Russia invaded its neighbor, sending natural gas prices also spiking.

Britain and other major economies now face the likely prospect of grim recessions next year, as consumers and businesses battle rampant inflation and rising rates after years of ultra-low borrowing costs.

"The most important take of the year is: the era of easy money ended, and ended for good," noted SwissQuote analyst Ipek Ozkardeskaya.

"And given that there is still plenty of cheap central bank liquidity waiting to be pulled back, the situation may not get better before it gets worse," she said.

"Recession, inflation, stagflation will likely dominate headlines next year."

London was down 0.8% and Frankfurt shed 1.1% in half-day sessions ahead of the New Year holiday. Paris closed 1.5% lower.

On Wall Street, the Dow ended 0.2% lower while the tech-heavy Nasdaq shed 0.1%.

"It would appear that people have checked out for the year -- and have settled back into holiday mode for New Year celebrations," Erlam said.

Key figures around 2145 GMT

New York - Dow: DOWN 0.2% at 33,147.25 (close)

New York - S&P 500: DOWN 0.3% at 3,839.50 (close)

New York - Nasdaq: DOWN 0.1% at 10,466.48 (close)

London - FTSE 100: DOWN 0.8% at 7,451.74 (close)

Frankfurt - DAX: DOWN 1.1% at 13,923.59 (close)

Paris - CAC 40: DOWN 1.5% at 6,473.76 (close)

EURO STOXX 50: DOWN 1.5% at 3,793.62 (close)