Market snapshot: more volatility and turmoil on global exchanges

These are interesting times, and a steady flow of news means active investors must stay alert. Our head of markets rounds up the latest market moving events.

As the third quarter of 2022 draws to a close, investors remain hunkered down in the face of a barrage of disturbing news.

Comments from some Federal Reserve members revealed the central bank’s determination to continue its aggressive rate hiking policy, with inflation being the main target and with recession potentially the collateral damage. Indeed, the latest jobless claims figure was another example of good news translating to bad news, as the better-than-expected number will do little to change the Fed’s resolve.

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With volatility and turmoil sweeping across markets due to fears of inflation, recession, currency volatility and escalating geopolitical tensions, there are few signs that the last quarter of the year will be any less challenging for investors. The imminent third quarter reporting season will likely show some unpleasant surprises, and individual stocks are likely to be punished for any earnings misses, let alone muted outlook comments.

In the meantime, each of the major indices are ending the quarter on a sour note. In the year to date, the Dow Jones is down by 20%, the S&P500 24% and the Nasdaq 31% and with all of the indices in bear market territory, thoughts of relief are increasingly difficult to identify.

Asian markets picked up the bearish baton from Wall Street as similar themes dampened sentiment. In addition to recessionary and geopolitical concerns, China’s central bank seems poised to intervene in an effort to stabilise its currency, with any such move adding to the country’s current woes around Covid-19, a wilting property sector and declining consumer sentiment.

In addition, a reading from the Chinese manufacturing sector showed a further decline for September, suggesting a contraction. A renewed drop in output has also likely had an impact on general purchasing activity.

In what has been a calamitous week for the UK economy, there was a rare glimmer of hope as the GDP reading unexpectedly edged into positive territory for the second quarter, defying expectations of a recession – for now. Sterling has also found some cautious support against the dollar after the Bank of England’s previous decision to resume bond buying, although jitters will remain as the government continues to justify and explain the implications of its fiscal largesse.

In the meantime, the door is now open for the Bank to pursue a more aggressive rate hiking cycle, the implications of which have already been felt across a number of sectors, with the housebuilders in the eye of the storm.

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In early exchanges Friday, the FTSE100 edged slightly and unconvincingly higher, although this was neither enough to offset the losses of the previous session nor stem the declines in the year to date, with the premier index now having lost 7%.

For the FTSE250, the more widely accepted barometer of UK economic prospects, the declines are far more severe, with a 28% decline in the year to date as global economic concerns continue to reverberate.