December 2022

• Global markets ended 2022 with mixed performance as investors balanced moderating inflation trends against continued recession concerns and ongoing central bank tightening.
• Major central banks slowed the pace of interest rate increases but maintained hawkish guidance regarding future policy.
• China accelerated the dismantling of its zero-COVID policies, boosting reopening optimism globally.
• Technology and growth sectors experienced renewed volatility as bond yields stabilised at elevated levels.
• Energy prices moderated compared with earlier peaks, easing some inflation pressures.
• Emerging markets benefited from improving Chinese reopening expectations and weaker dollar conditions.

Asia (ex. Japan)

Asian markets outside Japan advanced during December as China rapidly relaxed many of its zero-COVID restrictions, raising expectations for stronger economic recovery and regional demand during 2023.

Although rising infection levels created short-term disruption within China, investors focused on the longer-term reopening benefits for consumption, trade and manufacturing activity across Asia.

Europe

European equities delivered mixed performance during December as recession concerns persisted despite easing energy prices and moderating inflation data.

The European Central Bank continued signalling further interest rate increases ahead, while governments maintained fiscal support measures aimed at cushioning households and businesses from high energy costs.

United States

U.S. equities weakened modestly during December as the Federal Reserve reiterated that interest rates would likely remain elevated for longer than markets had previously anticipated.

Technology and growth sectors experienced renewed pressure due to higher yields and concerns regarding slowing earnings growth, while investors continued monitoring inflation and labour market trends closely.

United Kingdom

UK equities remained relatively stable during December as declining energy prices provided some relief from inflation pressures, though recession concerns continued weighing on sentiment.

The Bank of England raised interest rates further while warning that the UK economy was likely entering a prolonged period of weak growth.

Japan

Japanese equities experienced volatility during December after the Bank of Japan unexpectedly adjusted its yield curve control policy, leading to a sharp rise in Japanese bond yields and strengthening of the yen.

Investors interpreted the move as a possible sign of future policy normalisation after years of ultra-loose monetary conditions.

Emerging Markets

Emerging markets delivered positive performance during December as Chinese reopening optimism and weaker U.S. dollar conditions supported investor sentiment.

Commodity-exporting economies also benefited from improving demand expectations linked to anticipated Chinese recovery during 2023.

Commodities

Commodity prices delivered mixed results during December. Oil prices moderated due to slowing global growth expectations despite optimism surrounding Chinese reopening.

Industrial metals strengthened as investors anticipated stronger Chinese infrastructure and manufacturing demand, while gold prices remained supported by easing dollar strength and expectations that global interest rate increases could slow during 2023.