City thinking, local knowledge

January Market Commentary

By Questa Chartered


As 2022 drew to a close, there was a mixed picture worldwide as major economies sought to respond to soaring energy prices, rising living costs and the continuing impact of Russia’s invasion of Ukraine.

In our first round-up of the year, we look at where we left off in 2022 all across the world…


The year ended with more downbeat economic news for the UK, with the Office for National Statistics reporting that the economy shrank by 0.3% in the three months to September. This was worse than its previous estimate of 0.2%, and Chancellor of the Exchequer Jeremy Hunt subsequently conceded that the “very challenging” economic situation would “get worse before it gets better”.

Poor growth was driven largely by soaring inflation, with official figures showing that prices increased by 10.7% in the year to November. Although this is down on the 11.1% figure recorded in October, this is still well above the Bank of England’s 2% target.

The Bank has sought to tackle rising prices by increasing interest rates, and in December, the base rate was raised by 0.5% to 3.5% – its highest level in 14 years.

The prospect of further interest rate rises appears to be putting many people off buying property, with Halifax reporting the biggest drop in UK house prices in 14 years during November. In addition, Nationwide said it saw the largest month-on-month fall in house prices in more than two years, as well as a “sharp slowdown” in annual house price growth.

According to forecasts from the Bank of England, the pressure on existing homeowners is also set to grow, with approximately 4m households facing higher mortgage payments in 2023, with the average monthly mortgage bill going up from £750 to £1,000.

High inflation also had an impact on government borrowing, which hit £22bn in November 2022, up from £13.9bn a year earlier. This was the highest November level of borrowing on record, and was fuelled by the government’s support for households struggling with rising energy bills.

Meanwhile, the Chancellor has confirmed that he will deliver his next Budget on March 15th, in which he will outline the government’s upcoming tax and spending plans. This will be accompanied by a forecast from the Office for Budget Responsibility.

A key priority for Mr Hunt will almost certainly be providing reassurances to UK investors, as a poll by City broker HYCM found that 78% of investors believe the measures announced in the recent Autumn Statement won’t have a positive impact on their portfolios. Only 27% of investors said they had faith in the Conservative Party’s economic policies, while 30% said that they don’t think Jeremy Hunt is the right person to be Chancellor.

There is also considerable pressure on the government to act in the face of widespread industrial action. Nurses, Border Force staff, Royal Mail workers and rail staff were among those to walk out during December as they called for better working conditions and pay increases to keep up with rising prices. Prime Minister Rishi Sunak, however, has described union leaders as “unreasonable” and said he is working on “new tough laws” to limit the disruption caused by strikes. Significantly, he refused to rule out banning emergency services workers from taking strike action.

The run-up to Christmas is a crucial time for many sectors of the economy, notably retail, but pressure on household budgets led to sales volumes dropping by 0.4% in November. However, the ONS did note a surge in food sales throughout the month, which suggests many people were buying food early to try to spread out the cost of Christmas.

The World Cup also had a big impact on people’s spending in December, with many turning to pubs to watch England in action. The British Beer and Pub Association stated that while the tournament won’t “make up for an extremely difficult trading environment”, it may “at least provide some short-term uplift to the industry”.

UK businesses are also facing ongoing uncertainty over energy costs, as an announcement on extending support for struggling firms due before Christmas was postponed until the new year. Kate Nicholls, Head of UK Hospitality, said the delay was “disappointing”, as “businesses are facing daily changing rates and contract decisions in Jan, so certainty was really needed”.

The government has, however, confirmed it plans to address rising energy prices by doubling imports of US gas over the next year and approved the UK’s first new deep coal mine for 30 years.

Clothing chain Joules was among those to struggle amid the cost of living crisis, as it fell into administration in November. However, it was rescued in December by retailer Next, which means about 100 Joules stores will remain open. Next will own a 74% share of the business, with the remaining stake being owned by founder Tom Joule.

In the financial services sector, businesses are facing some of the biggest regulatory reforms in more than 30 years, as the government has unveiled plans to “cut red tape” and “turbocharge growth” in the industry. According to the Chancellor, the proposed changes will secure the UK’s status as “one of the most open, dynamic and competitive financial services hubs in the world”, and enable the country to “seize on our Brexit freedoms”.

Although Mr Hunt is keen to talk up the opportunities offered by the UK’s departure from the European Union, his optimism is not universally shared. According to the London School of Economics, the rising cost of importing food from Europe post-Brexit pushed food prices up by nearly £6bn in the two years to the end of 2021, and added £210 to the average household food bill during this period.

Meanwhile, a survey of businesses by the British Chambers of Commerce found that 77% of firms, for which the Brexit trade deal with the EU applies, don’t believe it is helping them to increase sales or grow their business. In addition, more than half of those polled said they are struggling to adapt to new trading rules.

On the financial markets, the FTSE-100 Index ended the month at 7.451 points. While the index rose by 0.91% over the year, it fell by 1.38% during December. The pound ended 2022 up 0.41% against the dollar.


2022 ended on a grim note as Ukraine was struck by a wave of Russian missiles on New Year’s Eve.

This came shortly after Ukraine’s President Volodymyr Zelensky, who was named Person of the Year by Time Magazine, travelled to Washington for his first overseas trip since Russia invaded in February.

In a significant demonstration of western solidarity, Zelensky met with his US counterpart Joe Biden and gave a speech to Congress, while the US committed to supplying Ukraine with a Patriot missile system.

The UK, meanwhile, has confirmed it will send hundreds of thousands of rounds of artillery ammunition to Ukraine, and Prime Minister Rishi Sunak called on other European nations to either maintain or increase military support for the country during 2023.


December saw European Union members agree to cap soaring wholesale gas prices for households. From February 15th, the cap will be triggered if prices exceed €180 per megawatt hour for three consecutive days. Germany had previously opposed the move, but agreed after securing stronger safeguards in case the cap had a negative impact.

Individual member states are pressing ahead with their domestic support packages too, with Spanish Prime Minister Pedro Sánchez confirming that another €10bn will be put towards measures such as helping low-income households and cutting VAT.

EU leaders have also agreed to implement the minimum taxation component of the OECD’s reform of international taxation. This means the profits of large multinational and domestic groups or businesses with a combined annual turnover of at least €750m will be taxed at a minimum rate of 15%.

In another significant move, EU interior ministers agreed to accept Croatia into the Schengen zone ahead of it adopting the euro in the new year. However, Austria and the Netherlands voted against admitting Romania and Bulgaria to the Schengen zone as well, due to concerns over their management of illegal migration.

Meanwhile, the EU agreed to introduce a law that blocks products linked to deforestation from being sold in the single market. The bloc believes this will help to reduce international carbon emissions, although some critics have argued it could damage worldwide trade.

In addition, phone manufacturers have been given until the end of 2024 to adopt a common charging cable. This means major tech brands such as Apple will be unable to sell new devices in EU member states unless they switch to a universal cable. This came shortly after the European Commission ruled that airlines can offer 5G technology on board planes, which could potentially mean passengers will not have to put their phone on aeroplane mode when they fly.

Notably, the aviation sector is enjoying a resurgence following the end of Covid-related restrictions, with the Tui Group reporting that its revenue almost quadrupled in the last year. Whereas the company saw a €2bn loss in 2021, its adjusted EBIT rose to €409m in 2022. Hungarian carrier Wizz Air also reported positive figures, with passenger numbers rising by 70% in November 2022 year-on-year to 3.6m.

Nevertheless, the tough economic climate in Europe was reflected on the financial markets, with Germany’s DAX index falling by 4.17% in December to end the month at 13,923 points. Meanwhile, the French CAC 40 index fell by 3.98% in the month to end at 6,473 points.


The US continued to confound analysts warning of recession, as its gross domestic product went up by 2.9% between July and September 2022, which is higher than many observers had expected. Year-on-year inflation has also come down slightly, falling from 7.7% in October to 7.1% in November, which was again better than had been widely forecast.

Nevertheless, inflation remains uncomfortably high, which prompted the Federal Reserve to lift its key interest rate by 0.5%. This takes the US benchmark rate to 4.25% – 4.5% – the highest rate in 15 years. But significantly, the size of the rate hike was smaller than the 0.75% increases seen in recent months.

The employment market also performed strongly in the face of strong economic headwinds. Although the unemployment rate remained at 3.7% in November, employers added 263,000 jobs throughout the month and average hourly pay went up by 5.1%.

Despite this apparent good news, several prominent names saw staff walkouts, with Starbucks employees at 100 stores going on strike for three days due to a dispute over joining unions. Meanwhile, staff at The New York Times downed tools for the first time in five decades for 24 hours as they demanded better pay and benefits.

December also saw the US government seek to boost trade opportunities and strengthen relations with African nations at the US-Africa Leaders Summit. US Secretary of State Anthony Blinken believes that by engaging with “one of the world’s fastest-growing economic regions”, there is the potential to build “one of the 21st century’s most successful economic partnerships”.

As ever, President Biden’s predecessor Donald Trump wasn’t far from the headlines, as he started offering digital trading cards depicting him as, among other things, an astronaut and a superhero. However, his bid to be re-elected as President could be in jeopardy, as the committee investigating the 2021 riot at the US Capitol has recommended four criminal charges against him, including inciting or assisting an insurrection. The Department of Justice is not legally obliged to accept its recommendations and will now have to decide whether criminal charges will be filed against Mr Trump.

December also saw the latest chapter of the continuing drama at social media giant Twitter. Chief Executive Elon Musk asked users of the platform if he should stand down and pledged to abide by the result. More than half of those who responded voted yes, and he has promised to resign when someone “foolish enough” to replace him has been found.

Twitter also drew heavy criticism after the suspension of several journalists from the platform, with Melissa Fleming, the UN’s Under Secretary General for Global Communications, stating that “media freedom is not a toy” and is “the cornerstone of democratic societies”.

The difficult global economic climate weighed heavily on the financial markets during December, with the Dow Jones falling by 3.73% to end at 33,147, and the more broadly-based S&P 500 index falling by 5.7% to end at 3,839.

Far East

China’s decision to relax its zero-Covid policy has led to brighter economic forecasts for the country, with US bank JP Morgan predicting its GDP will rise to 4.3% in 2023. However, it also expects China will go through a “transitional pain period” before seeing a “strong recovery”.

Inevitably, the relaxation of Covid restrictions has led to a surge in cases across the country, which has raised concerns in other parts of the world. For example, the UK’s Department of Health and Social Care has asked people travelling from China on direct flights from January 5th to take a pre-departure Covid test. China’s borders will be fully reopened on January 8th.

Coronavirus restrictions were a big factor behind a slump in the performance of electronics manufacturer Foxconn, which supplies Apple. The company’s revenue fell by 11% in November, when compared with the same period of the previous year.

This came as the Chinese government sought to tackle US trading curbs that mean chips made using American tools cannot be exported to China. The government is reportedly drawing up a support package worth £116.5bn to keep its semiconductor industry afloat and establish itself as a rival to the US in this field.

Meanwhile, Japan is to double its military spending over the next five years, which will include purchasing long-range missiles from the US. The country is also collaborating with Italy and the UK to develop a new fighter jet that makes use of artificial intelligence technology.

On the financial markets, Hong Kong’s Hang Seng index rose by 5.92% to end December at 19,781, while Japan’s Nikkei Dow index fell by more than 6% to end the month at 26,094. China’s Shanghai Composite index rose slightly by 0.02% to end at 3,971, while the market in South Korea fell by 1.93% to 2,236.

Emerging Markets

The United Nations has predicted that India will overtake China as the most populous country in the world by the middle of April. This comes as the two nations continue to purchase Russian oil, despite western nations imposing sanctions on Russia following its invasion of Ukraine. India and China are now the largest buyers of Russian oil, which is being offered at a discounted price to Asian nations.

Russia, meanwhile, is understood to be strengthening its defence relationship with Iran, with the US stating that it believes they are considering jointly producing lethal drones.

As the conflict in Ukraine continues, the prospect of it escalating into a global nuclear conflict remains a very real possibility. However, Russia’s President Vladimir Putin has insisted it will not use its nuclear weapons first and argued the country has not “gone mad”.

In Brazil, December saw the death of one of its greatest heroes – football icon Pele, and the country’s president declared three days of national mourning.

On the financial markets, India’s BSE Sensex index fell by 0.48% to end the month at 60,840, while Russia’s MOEX index saw an upturn of 0.33% to end at 2,154. Brazil’s Bovespa index, meanwhile, fell by 0.46% to end the month at 109,735.

And Finally…

Whether England football fans truly believed that 2022 was going to be their year is open to debate, but at least one supporter really felt that the Three Lions would return from Qatar victorious. Keri Baxter, managing director of Poole-based Wholesale Clearance UK, was so confident that he arranged for his firm to print 18,000 t-shirts, bearing the words “England”, “Cup Winners 2022” and “It’s Finally Home”.

Although he admits to being “gutted” by England’s quarter-final defeat to France, he has the added inconvenience of struggling to sell this strictly limited edition merchandise.

Across the border in Scotland, another man was indulging in another popular national pastime – spotting famous faces in food. Myles Campbell from North Ayrshire was enjoying a packet of Revels when he spotted one chocolate that he believed looked like a “wee baby Jesus”. Coming as it did in the run-up to Christmas, Mr Campbell couldn’t bring himself to eat it and the chocolate is also off limits to his children.

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