Great turmoil in the financial markets

Global stock markets witnessed widespread turmoil yesterday on fears of a “corona” outbreak in China, with shares in South Korea down around two percent in the last trade of 2022. The main index posted its worst annual performance since 2008.
South Korea’s composite stock price index (KOSPI) fell 44.05 points, or 1.93 percent, to 2,236.40 by the end of the session, its lowest closing level since Oct. 25. The Kospi index fell 24.89 percent in 2022, its first annual loss in four years.
“The market decline this year is due to actions by central banks around the world to raise interest rates,” said Kim Seok-hwan, an analyst at Mirae Asset Securities Brokerage. He added: “Next year we will reap the result of such moves… an economic recession.” The won has lost six percent of its value against the dollar this year, extending losses for a second year in a row, after falling 8.6 percent in 2021 and posting its biggest decline since 2008.
Japan’s Nikkei index also closed lower, after falling to its lowest level in about three months during the session, tracking the impact of Wall Street’s lackluster performance, with technology heavyweights leading the decline. The Nikkei index closed down 0.93 percent, after reaching 25,953.92 points during trading, the lowest level since October 3. The broader Topix index fell 0.72 percent to 1,895.27 points.
34 stocks rose on the Nikkei index, compared with a decline of 182 stocks. All 33 sub-indices fell, except for two, and the index of oil exploration companies led the decline.
In turn, the Stoxx 600 index fell by 0.4 percent. For the whole year so far, it has decreased by 12.8 percent. The performance of China-exposed luxury goods companies such as LVMH and Richemont overshadowed the European index in early trading.
Shares of energy companies fell 0.6 percent, and mining companies fell 0.3 percent, following the prices of raw materials. Shares of companies for the production of basic consumer products such as “Nestle” and “L’Oreal” fell by 1.2 and 0.5 percent, respectively.
For its part, gold prices rose yesterday (Thursday), with the dollar and US Treasury yields falling, as traders await further indications of the Federal Reserve’s plans to raise interest rates.
Gold in immediate trade was up 0.2 percent at $1,807.57 an ounce (ounce) at 03:03 GMT, after falling 1 percent in the previous session. US gold futures fell 0.1 percent to $1,814.30.
The dollar index fell 0.2 percent. A weaker dollar makes bullion more attractive to buyers holding other currencies. Benchmark yields on US Treasury bonds fell to a ten-year low, after hitting a six-week high in the previous session.
Leverage is on track for an annual decline of around 1 percent, under pressure from a sharp increase in US interest rates. Still, prices rose nearly $200 from their lowest level in more than two years in September, on hopes that the US central bank will slow the pace of interest rate hikes. The Fed slowed that pace to 50 basis points in December after four consecutive hikes of 75 basis points each, as Fed Chairman Jerome Powell stressed the need to keep interest rates high for some time to curb inflation. High interest rates weaken gold’s appeal as a hedge against inflation and increase the opportunity cost of owning the yellow metal because it doesn’t yield returns.
In other precious metals, the spot price of silver was up 0.2 percent at $23.57, platinum was up 0.3 percent at $1,010.67, and palladium was up 0.2 percent at $1,786.97.
The Japanese yen rose nearly 0.5 percent to 133.83 yen per dollar. The pound rose 0.19 percent to $1.2040, but was not far from a three-week low of $1.1993 last week. The euro rose 0.15 percent to $1.0628.
The Australian dollar rose 0.16 percent to $0.6751, while the New Zealand dollar rose 0.33 percent to $0.6331. The offshore Chinese yuan rose slightly to 6.9932 per dollar.
In the cryptocurrency market, Bitcoin rose 0.13 percent to $16,561, while Ether gained 0.26 percent to $1,192.60, although both are on track to fall more than 60 percent this year.