The only major global equity index to post a gain in calendar 2022 was the UK’s FTSE 100, up 0.91% for the year.
Australian Share Market (ASX 200) – up 1.01% for the week on light volume with many market participants still on leave. The Materials sector (+4.64%) was a key contributor with Consumer Discretionary (+3.23%) and Financials (+0.40%) the next best. The Energy sector (-2.37%) led the declines followed by Health Care (-2.01%) and Utilities (-1.51%). Within the Materials sector, Gold stocks were the strongest and are off to a good start to the year with the Gold Index up almost 10% in early 2023. The ASX 200, down 5.5% last year, performed relatively well in 2022 compared to other markets in our region and around the world.
Calendar year 2022 saw unusually large sector performance divergence with our Energy sector up 49% compared to Info Tech down 34%, or 83 percentage points separating the best and worst sectors. Utilities had a good year up 30% with Materials up 13% and Financials up 1.6% the only other sectors to post gains. The REIT sector was down 21% with Consumer Discretionary down 20.4%, Communication Services down 10.5%, and Health Care down 7.2% for the year were the other notable decliners. In our region the Nikkei fell 9.37% in 2022 while the Hang Seng fell 15.46% and the KOSPI fell 24.89%. In emerging markets China’s Shenzhen A share index fell 21.94% with India’s Sensex up 4.44% and the only regional market higher last year. In the US the DJIA fell 8.78%, the S&P 500 fell 19.44% and the NASDAQ fell 33.10% over the course of 2022. The sector performance divergence in the US was even larger with their Energy sector up 59% compared to Communication Services down 40%, or 99 percentage points separating their best and worst. In Europe the STOXX 600 fell 12.90%, the DAX fell 12.35% while the UK’s FTSE 100 rose 0.91% and was the only major global equity index not to fall last year.
US Share Market (S&P 500) – up 1.45%, with the Dow (+1.46%), and Nasdaq (+0.98%) also higher for the week. There was some green on the screens this morning as market participants start to return from the break with US equities posting their best day of the new year on Friday night and the major indices now slightly higher, and bond yields slightly lower, than they were before Christmas. New year investors will be attentive to any changes to the current market dynamics and if the new year brings new trends, but the major themes remained unchanged last week with reports showing the US labour market remaining strong (non-farm payrolls and JOLTs), inflation easing (lower Eurozone CPI), the US Federal Reserve remaining hawkish (Fed minutes), growth weakening (ISM services contracting) and value stocks outperforming albeit on light volumes. The release of the December FOMC meeting minutes was the monetary policy highlight and was in line with the hawkish press conference held at the time. The minutes showed that no participants felt a pivot to rate cuts this year would be appropriate and that they remain alert to any unwarranted easing in financial conditions.
In fiscal policy, Republicans officially took over the House of Representatives following the midterm elections with a drawn-out process of electing a new Speaker and conservatives gaining some concessions which could potentially limit government debt increases and spending. Economic highlights were the December nonfarm payrolls report which increased by 223K and a bit higher than consensus for 205K with the unemployment rate falling back to 3.5% which was much lower than the 3.7% expected. The December ISM Services Index on the other hand was much weaker, printing at 49.6, well below the expected 55 and falling into contraction (below 50) for the first time since May 2020.
Sony (SONY) Honda Mobility partnership considering an IPO for electric vehicle production. The chairman of Sony Honda Mobility, a joint venture between Sony who will provide the technology, sensors and cameras, and Honda who will provide the mechanical and production expertise, said the 1-year-old partnership is considering a stock offering as an option to raise cash in the future although discussions are preliminary. The costs of building a high-value electric vehicle such as the newly unveiled Afeela, would be significant, and a stock offering has been discussed as one potential avenue for raising funds. Sony unveiled the low-slung sedan prototype at a news conference last week in which it announced the Afeela brand name. The car is expected in the United States starting in 2026, then in Japan with Sony Honda Mobility planning a global roll-out after that.
Amazon (AMZN) to increase last years’ job cuts to around 18,000. Amazon CEO Andy Jassy provided an update last week on the company’s annual planning review process for 2023 noting this year’s review has been more difficult given the uncertain economy and that they’ve hired rapidly over the last several years. Between the reductions they made in November (around 10,000) and the ones announced last week, Amazon plan to eliminate just over 18,000 roles. Several teams are impacted however the majority of role eliminations are in the Amazon Stores and PXT organizations. CEO Andy Jassy said in the statement that “Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so. These changes will help us pursue our long-term opportunities with a stronger cost structure.”
CME Group (CME) hits record average daily volumes in 2022. CME Group, the world’s leading derivatives marketplace, reported their full-year, Q4 and December 2022 market statistics last week showing they reached a record average daily volume (ADV) of 23.3 million contracts during the year, an increase of 19% over 2021. The calendar 2022 highlights across asset classes include Equity Index ADV increasing by 39%, Interest Rate ADV increasing by 18% and Foreign Exchange ADV increasing by 24%. ADV outside the United States increased by 15% to 6.3 million contracts, including 30% growth in Latin America, 27% in Asia, and 10% in EMEA.
The Week Ahead
Domestic economic data releases this week include Building Approvals today, Retail Sales on Wednesday, the Balance on Goods and Services on Thursday and Housing Finance on Friday.
Internationally, Chinese Loan Growth and Money Supply is today. US consumer Credit and Japanese Household Consumption and Income and Tokyo CPI is tomorrow. Chinese CPI and PPI are on Thursday. The key data-point this week is US CPI on Friday where the price index is expected to be unchanged for the month and down to 6.5% for the year and below 7% annually for the first time since November 2021 as we start cycling some big CPI increases from late 2021 and early 2022. Also Friday is UK GDP, Industrial and Manufacturing Production and Eurozone Industrial Production and Trade Balance.
Corporate reporting this week includes quarterly results from Citigroup and Bank of America on Friday as the US Q4 reporting season gets underway.
Saward Dawson Wealth Advisors Pty Ltd, a Corporate Authorised Representative of Akambo Pty Ltd t/a Accountants Private Advice
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