THE fact that US markets are closed on Monday to mark Presidents’ Day will probably count as a relief following a two-week losing streak for the world’s largest stock market.
The S&P 500 finished last week on a downer, taking losses in the year so far to almost 10%, thanks to ongoing fears that Russia will invade its neighbour Ukraine in the coming days. Diplomatic efforts continue in the hope that further violence can be avoided but markets are spooked, fearing a hot war could further disrupt global energy markets in particular.
With conflicting reports about Russian’s next steps, the volatility is likely to continue this week.
Those geopolitical concerns mean that news on the pandemic has taken a back seat, but there are developments there, too. In the UK, the Government is expected to announce the early lifting of all Coronavirus restrictions, handing a potential boost to the economy here in the weeks ahead.
That should add to the momentum created by positive PMI data on Monday, which showed a jump in services and manufacturing indices. That news helped the FTSE 100 start the week on the front foot. The next big question for UK investors is whether the Bank of England will push ahead with yet another rate hike in March following rises at the last two monetary policy meetings. The Bank of England Governor will appear before MPs to explain the Banks thinking on inflation and rates on Wednesday.
Soaring inflation has markets betting on a hefty half-point increase in March. Tightening at central banks remains the major headwind for stock markets right now, particularly for those growth-focused tech names. They have been hurt by inflation eroding the future value of their earnings, which has made up such a large part of their value up to now.
It’s been a better year so far for value-oriented, cyclical parts of the stock market – and there will be news of some of those this week. Companies reporting in the UK include those from the travel and leisure industry. Businesses across the sector have been hit by restrictions since the start of the pandemic, with the Omicron variant also denting bookings. Heathrow, the biggest UK airport, is due to report. So is the owner of British Airways, International Airlines Group, and InterContinental Hotels.
Some banks will also report, with earnings due to be released by HSBC, Barclays, Lloyds and Metro Bank. Banks are one industry that could be helped by a rising interest rate environment because it gives them more from to profit on the gap between rates they lend at and rates they offer savers to keep money on deposit.
Finally, one company grabbing headlines this week may well be Centrica, the owner of British Gas. It will report results with the media’s attention trained on signs of big profits at a time when household energy bills are soaring.
Read More: Market news today – 21 February 2022