(AFP) Stock markets were wrapping 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.
European indices closed their final sessions of the year in the red while Wall Street headed towards a similar finish.
For the year, Frankfurt was down more than 12 percent and Paris lost 9.5 percent for their worst performances since 2018. London, however, was up 0.9 percent in 2022 as the energy sector was buoyed by soaring energy prices.
Wall Street faces its worst annual drop since 2008, with the S&P 500 index down 20 percent and the tech-heavy Nasdaq losing 30 percent in the final hours of trading for the year.
Equities were slammed as the US Federal Reserve, the European Central Bank and the 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 percent and Shanghai dived 15.1 percent 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. That also prompted worries about the impact on stretched global supply chains.
Tokyo plunged 9.4 percent 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 fuelled 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 said.
In commodities, oil prices rallied in 2022 with Brent gaining 7.5 percent and New York crude adding 4.2 percent.
However, they remain 40 percent below peaks struck in March on supply woes after key producer Russia invaded its neighbour, 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 percent lower and Frankfurt shed 1.1 percent in half-day sessions ahead of the New Year holiday. Paris closed 1.5 percent lower.
On Wall Street, the Dow was 0.7 percent lower while the tech-heavy Nasdaq retreated by 0.8 percent.
“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 1655 GMT
New York – Dow: DOWN 0.7 percent at 32,978.75 points
London – FTSE 100: DOWN 0.8 percent at 7,451.74 (close)
Frankfurt – DAX: DOWN 1.1 percent at 13,923.59 (close)
Paris – CAC 40: DOWN 1.5 percent at 6,473.76 (close)
EURO STOXX 50: DOWN 1.5 percent at 3,793.62
Tokyo – Nikkei 225: FLAT at 26,094.50 (close)
Hong Kong – Hang Seng Index: UP 0.2 percent at 19,781.41 (close)
Shanghai – Composite: UP 0.5 percent at 3,089.26 (close)
Euro/dollar: UP at $1.0689 from $1.0661 at 2130 GMT on Thursday
Pound/dollar: UP at $1.2066 from $1.2055
Euro/pound: UP at 88.59 pence from 88.44 pence
Dollar/yen: DOWN at 131.84 yen from 133.01 yen
West Texas Intermediate: UP 0.6 percent at $78.84 per barrel
Brent North Sea crude: UP 0.8 percent at $84.10