The Economist - USA (2022-01-29)

8 TheEconomistJanuary29th 2022
The world this week Business

Theworld’sstockmarkets

continued to slide this week,

as investors prepared for tight­

er monetary policy. By January

26th the s&p500 index had

dropped by 9% since the start

of the year. Share prices else­

where have been falling too.

The nasdaq composite, a

tech­heavy index, has dropped

more sharply than the broader

market. Higher interest rates

would lower the value that

investors place on the future

profits of speculative firms.

America’s Federal Reserve

signalled that it will indeed

raise interest rates in March to

try to bring inflation under

control. That will be the first

increase since 2018. The Fed

also signalled that it will wind

down its bond­buying pro­

gramme, which was expanded

during the pandemic.

Cryptocurrencies have also

experienced a sell­off recently,

partly caused by growing

scrutiny from regulators.

Bitcoin sank to a six­month

low this week. It has lost

roughly half its value since

November. The price of small­

er currencies, such as ethe­

reum and litecoin, also fell. 

Microsoft said that its fourth­

quarter sales grew to a record

$51.7bn, up 20% from the same

period last year. Net income

rose to $18.8bn. The results

were fuelled by its gaming and

Windows software units. But

even though they beat an­

alysts’ forecasts, the firm’s

share price fell after the an­

nouncement. It later recovered

when the firm published rosy

forecasts for its cloud division.

Boeing reported a loss of

$4.3bn for 2021, its third annu­

al loss in a row. That is partly

becauseofa chargeof$3.5bnit

hadtopaytocompensate

customersforthedelaysin

deliveringits 787 Dreamliner.

Factorydefectsandregulatory

problemshaveslowedproduc­

tion.

Resultswerealsogloomyfor

CathayPacific, HongKong’s

flag­carrier.Itsaidit expects

lossestoreachuptoHK$6.1bn

($783m)in2021.Althoughthat

isanimprovementonits

HK$21.6bnlossin2020,the

firmcontinuestosufferunder

theterritory’ssevereborder

restrictions.

Feelingtheheat

As part of a firm­wide restruc­

turing plan Unilever, a con­

sumer­goods giant, said that it

will axe about 1,500 manage­

ment jobs. Pressure to improve

performance has been in­

creased of late by Trian, an

activist hedge fund which has

built a stake in the company,

and by the firm’s failed bid to

buy the consumer­health

business of GlaxoSmithKline, a

British drugmaker.

Tesla reported record net

profits of $2.3bn in the fourth

quarter of 2021. But Elon Musk,

the electric­car maker’s boss,

warned that supply­chain

woes, such as the shortage of

semiconductors,wouldprob­

ablyweighonthefirm’sresults

during2022.Henotedthat

Tesla’sfactorieshavebeen

runningbelowcapacityfor

severalquarters.

Samsung, a bigSouthKorean

chipmaker,reporteditsbest­

everquarter.Netprofitroseto

10.8trnwon($9bn),up64%

comparedwiththesameper­

iodlastyear.Theresultsof

Intel, another big chipmaker,

were less impressive. Fourth­

quarter revenues edged up to

$20.5bn, but net income fell by

21%. Both firms plan to in­

crease investment this year to

meet surging chip demand.

After resolving a row with

Mongolia’s government Rio

Tinto, the Anglo­Australian

miner, said it will push ahead

with the expansion of a large

copper mine in the country.

Wrangling over costs had put

the project on hold. A few days

earlier Serbia’s government

revoked Rio’s licence to build a

new lithium mine in the coun­

try, following protests by

environmentalists. 

In Japan the inflation rate rose

in December to its fastest pace

since the start of the pandem­

ic. Core inflation, which ex­

cludes the cost of fresh food,

increased by 0.5% compared

withthesamemontha year

earlier.Therisewasmostly

downtohigherenergyprices.

SouthKorea’seconomygrew

by4%in2021,thefastestpace

ofexpansionin11 years.Itwas

helpedbya jumpinexports

andconstructionactivity,

whichoffseta slowrecoveryin

thecovid­hitservicesectors.

Theimfpredictedthatthe

world economywill grow by

4.4% this year. That is a down­

ward revision from its projec­

tion in October of 4.9%. It is

also a slowdown from last

year’s growth rate of 5.9%. The

forecast reflects a downgrade

in expected growth in Amer­

ica, because of supply­chain

woes and monetary tighten­

ing, and in China, because of a

covid resurgence and financial

stress in the property market. 

Buyingthedip

The imfalso urged El Salvador

to reverse its decision to make

bitcoin legal tender. Last year

the country allowed consum­

ers to use the cryptocurrency

in any transactions, in a plan

spearheaded by Nayib Bukele,

the country’s 40­year­old

president. Mr Bukele respond­

ed to the suggestion by posting

a gifon Twitter depicting the

imfas Homer Simpson.

Stockmarkets

July1st2021=100,$ terms

Source:RefinitivDatastream

110

105

100

95

90

202 2022

Euro Stoxx 600

S&P 

NASDAQ comp