European Stock Markets Fall by an Average of 12 Percent This Year

On European stock exchanges, stock prices fell on Thursday morning as hopes faded that the easing of restrictive measures in China would accelerate the growth of its economy, given that the number of COVID-19 infections in the country is rising rapidly.

The STOXX 600 index of leading European stocks was down 0.3 percent at 9:30 AM, while it has lost about 12 percent since the beginning of the year.

This morning, the London FTSE index weakened by 0.71 percent to 7,443 points, while the Frankfurt DAX slipped by 0.18 percent to 13,900 points, and the Paris CAC fell by 0.40 percent to 6,484 points.

Since the beginning of the month, investor hopes for an acceleration in the growth of the Chinese economy have supported the markets, after local authorities abandoned the zero-COVID policy and began to ease restrictive measures.

However, the number of infections is rising rapidly not only in urban but also in rural areas of China, with some health experts estimating that more than a million people are infected with COVID-19 daily.

Investors fear that the lifting of restrictive measures will accelerate the spread of the virus and last for a longer period, which could pressure the healthcare system and the entire economy in the coming months.

Asian stock markets also saw declines. The MSCI Asia-Pacific index, excluding Japan, was down 0.8 percent around 9:30 AM, marking its third consecutive week of losses.

Meanwhile, the Nikkei index on the Tokyo Stock Exchange weakened by about 1 percent, while stock prices in Shanghai, Australia, Hong Kong, and South Korea fell between 0.4 and 1.9 percent.

In addition to the spread of COVID-19 in China, the markets are also negatively impacted by yesterday’s decline on Wall Street for the second consecutive day. The Dow Jones fell by 1.10 percent, while the S&P 500 slipped by 1.20 percent, and the Nasdaq index dropped by 1.35 percent.

The Nasdaq’s drop to its lowest level since July 2020 is primarily due to pressure on the technology sector, which is adversely affected by the environment of rising interest rates.

The S&P 500 has increased its loss since the beginning of the year to 20 percent, making 2022 memorable for its largest decline since the financial crisis of 2008.

This is a consequence of the aggressive increase in interest rates by the U.S. Federal Reserve to curb inflation, which reached its highest levels in over 40 years by mid-year.

In recent months, inflationary pressures have eased, but investors fear that the economy will plunge into recession next year, and interest rates will remain high for longer than expected.

Santa Claus Skips the Market

In December, stock prices usually rise, partly because investment funds and other large investors beautify their portfolios at the end of the year.

Since 1950, the S&P 500 index has recorded a decline in December only 18 times. This year, it seems that this statistic will worsen.

– This year there is no ‘Santa Claus rally’; investors have been greeted by the Grinch. In December, stock prices usually rise due to hopes that the economy and the market will grow next year. However, negative or weak economic indicators, concerns about the spread of the COVID virus in China, geopolitical tensions, high interest rates, and the risk of recession… all of this has prevented Santa Claus from appearing at the end of this year, says Greg Bassuk, director at AXS Investments.