The Paris stock market and Asian stocks rebounded slightly on Monday, but global stocks are still headed for their worst January since 2016 after a calamitous month.
Monday’s rise in European and Asian stocks follows a late surge on Wall Street on Friday, when a string of better-than-expected corporate earnings helped stabilize investor sentiment.
Still, investors say the environment for stocks remains uncertain as central banks raise interest rates, in addition to an expected further rise in oil prices that adds to inflationary concerns.
The problem remains, however, in the monthly results of the various stock market indices, which were heckled by the slowdown in Chinese factory activity in January. Added to this is the resurgence of Covid-19 cases, hitting production and demand. The MSCI World Index, while up on Monday, thus remains down more than 6% in January, the worst start to the year since 2016.
“This is not the classic massive sell-off affecting low-quality underperforming companies. This massive sell-off is not driven by fundamentals but by central bank action at a time of very strong growth,” said Flavio Carpenzano, chief investment officer of Capital One Group.
Fear is also holding over Ukraine, with markets concerned that a Russian invasion could also cut off vital gas supplies to Western Europe.
Separately, oil prices hit new highs after climbing for six straight weeks as political tension exacerbated concerns about limited energy supplies.
“We point out that the markets underestimated the Fed’s hikes at the beginning of the last two hike cycles and we think that will be the case again,” said BofA chief economist Ethan Harris.
Finally on the Paris side, the momentum is in luxury goods with L’Oreal, Hermes, or Kering, which were up more than 2%.
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