Written by Citadel Global Director, Bianca Botes

This year has been nothing, if not eventful. We started 2022 with Russian President, Vladimir Putin, declaring war on Ukraine. This event then triggered an energy crisis and has driven inflation, in major economies, to unprecedented levels, along with interest rates. And now, as the year draws to a close, COVID-19 has snuck in again to dominate headlines.

Key themes for our final Weekly Wrap for 2022 include:

  • Key economic drivers for 2022
  • Investors navigating mixed economic signals
  • Oil bounces back from one-year low



On the morning of 24 February 2022, the world witnessed the invasion of Ukraine by Russia. The ensuing war sent the world and financial markets into a maelstrom of uncertainty, with concerns of food shortages, gas outages, and spread of the geographic perimeters of the war should the West become involved. Recently, Forbes Ukraine published an analysis on the cost of the war. Russia has spent just over $82 billion in the last nine months. According to the report, Moscow allocated nearly $29 billion to support its army, and burned through close to $16 billion on soldiers’ salaries, and then exhausted more than $9 billion to pay off the families of servicemen killed in combat. Another $7.7 billion has been spent supporting the families of those wounded in the war, while the Russian army’s massive losses of military equipment on Ukrainian soil have cost the state almost $21 billion.


By now, these words are part of most conversations across the globe. This year saw central banks move swiftly to combat soaring inflation. In March 2022, the United States (US) Federal Reserve (Fed) moved to hike interest rates in the US for the first time since 2018, preparing markets for more aggressive hikes in the upcoming months, as the US faced its highest inflation in 40 years. Markets largely expect both the Fed and European Central Bank (ECB) to hike interest rates by 50 basis points in December, and while the rapid pace at which central banks have been hiking is slowing down, we can expect interest rates to stay higher for longer.


It’s not often that we see political turmoil in developed countries with well-established democracies. However, when there is fallout, it tends to leave a rather large dent. The independent Resolution Foundation calculated that the Truss government was responsible for roughly half of the £60 billion fiscal hole which the UK finds itself in. The debacle saw the term “Trussonomics” gain momentum, as the Tory party embarked on a bitter blame game amongst its top members. The fallout of a disastrous budget, saw Liz Truss become the shortest serving PM in the history of the UK, holding office for a mere 40 days, burdening her successor, Rishi Sunak, not only with the dire state of the UK economy, but also a loss of confidence in the country’s Conservative Party leadership.


While most countries saw COVID-19 restrictions become a distant memory in 2022, the world’s second largest economy, China, remained adamant about its zero-COVID policy, which forced restrictions onto millions of people across China. This move not only caused damage to the Chinese economy, but also to the global supply chain, and contributed to risk aversion across all emerging markets. As we head towards the end of 2022, there is a sense of optimism that these restrictions will soon be lifted. However, the impact of the lockdown will remain for months to come. A professor at the University of Hong Kong, Zheng Michael Song, estimated in March 2022 that the cost of China’s restrictions was costing the Chinese economy at least $46 billion per month, translating to about 3.1% of China’s GDP. However, recent lockdowns saw as much as 25.1% being removed from China’s GDP, with these numbers easing to 19.3% as of Monday, when restrictions were largely eased.


The US trade gap widened to a four-month high of $78.2 billion in October, following an upwardly revised $74.1 billion deficit in September and compared to market forecasts of $80 billion. Exports sank by 0.7%, a second consecutive monthly fall, to $256.6 billion, the lowest value since May. Sales for natural gas, other petroleum products and pharmaceutical preparations also fell, but crude oil, soybeans, travel, transport and business services saw an increase. Meanwhile, imports rose by 0.6% to $334.8 billion, their highest level since June, led by purchases of fuel, oil, finished metal shapes, nuclear fuel materials, passenger cars, pharmaceutical preparations, travel, telecommunication, computers and travel.

The eurozone S&P Global Composite Purchasing Managers Index (PMI) was confirmed at 47.8 in November, pointing to a fifth consecutive month of declines in private sector activity and the second-sharpest decline since May 2013, excluding months hit by COVID-19 restrictions. Although the rate of contraction eased for the first time over this period, due to a slower fall in manufacturing production, this masked an accelerated decline in the services sector. Eurozone October retail sales dropped by 2.7%, year-on-year. The reading came in slightly worse than market expectations of a 2.6% fall.

New car registrations in the UK jumped by 23.5% year-on-year to 142 889 units in November, slowing from a 26.4% increase the previous month but still registering growth for the fourth consecutive month. Registrations for battery electric vehicles continued to support growth in the auto market, rising 35.2% and offsetting the 5.7% drop in registrations of plug-in hybrid vehicles. In the meantime, petrol vehicle registrations expanded by 15%, making up 40% of the market. Still, overall registrations are 8.8% below pre-pandemic levels.

The Caixin China General Composite PMI fell to 47.0 in November, down from 48.53 in October, marking its lowest print since May, as the Chinese economy braced for the third wave of COVID-19 infections. The decline was broad-based, with factory activity shrinking for the fourth month in a row and the services sector contracting by its most in six months.

The South African economy advanced by a notable 4.1% from a year ago, in the third quarter of 2022, accelerating from 0.2% growth in the previous period and beating market estimates of a 2.8% increase. It is the strongest growth rate since the second quarter of 2021.The South African S&P Global PMI increased to 50.6 in November from 49.5 in October, pointing to the first increase in private sector activity in three months, as demand recovered slightly, leading to an increase in new business volumes. However, many companies continued to report weak economic conditions both domestically and globally. The local business environment has also been hit by ongoing loadshedding.


Stock futures, tied to the US’s blue-chip Dow Jones, traded largely sideways on Thursday, and those linked to the S&P 500 and Nasdaq added 0.1% and 0.2%, respectively. Investors are weighing recession risks and continue to grapple with uncertainty regarding the trajectory of US monetary policy. US economic indicators have been giving markets mixed signals, with the labour market and consumer demand still showing resilience, while some sectors, including housing and industry, are showing signs of a potential recession. This mixed outlook has added to uncertainty regarding the Fed’s rate hiking trajectory, with markets pricing in a smaller 50 basis point hike in December but betting on a higher terminal rate. Market moves came as the bond market rallied on growing concerns about sluggish economic activity, reflecting recent warnings from top US executives who flagged a possible recession next year. On the corporate side, Rent the Runway jumped almost 30% in premarket trading after the online retailer topped revenue expectations.

Major bourses in Europe traded sideways to lower on Thursday as investors remain cautious amid persistent concerns over an EU recession and rising interest rates and inflation. At the time of writing, the STOXX 600 was on track to book its fifth session of losses, while the DAX was set to close lower for a fourth consecutive day. Utilities, telecom and basic materials were among the worst performing sectors, while real estate stocks surged nearly 1%. With the data calendar in the EU on the lighter side, investors are keeping a close eye on ECB President, Christine Lagarde, in anticipation of the ECB’s monetary policy meeting next week. Investors are increasingly betting on a 50 basis point rate hike.

London equities extended losses for a third consecutive session on Thursday, with the benchmark FTSE 100 bottoming below the 7 500 mark, dragged down by the technology sector. In the absence of a fresh catalyst, sentiment remained clouded by worries about the pace of interest rate rises, to combat inflation, against a backdrop of slowing economic growth. In terms of individual share price movement, British American Tobacco was among the biggest laggards, down more than 2%, after the cigarette maker said it expects finance costs to rise.

The Shanghai Composite Index fell 0.07% to close at 3 197 while the Shenzhen Component Index dropped 0.25% to 11 390 on Thursday, with mainland stocks consolidating recent gains. Technology, healthcare and commodity-linked stocks led the decline, while financials, new energy, and consumer stocks gained. Investors are weighing optimism on the back of China’s shifting COVID-19 policies against renewed fears of a global recession. The benchmark indexes hovered near their highest levels since mid-September after China scaled back its nationwide COVID-19 restrictions further, these looser restrictions will allow people to travel between different parts of the country without negative virus tests and will stop local officials from locking down large areas. The 10 new measures issued this week followed 20 measures announced last month as Chinese authorities faced mounting pressure to end its strict zero-COVID policy that has weighed heavily on the economy.

The JSE FTSE All Share Index was trading slightly above the 74 100 level on Thursday, after two consecutive sessions in the red, mainly led by heavyweight tech stocks and luxury retailer Richemont amid reduced lockdowns in China. Meanwhile, uncertainty over the global economic outlook ahead of next week’s crucial central bank meeting continued to weigh on investors’ minds. Locally, power plant breakdowns at South Africa’s state power utility, Eskom, are at their highest level in at least a year, adding to the economic woes of the country, while uncertainty around the presidency following the Phala Phala report has also kept investors on edge.


West Texas Intermediate Crude futures were trading around $73/barrel on Thursday, bouncing back from a one-year low of $71.80 touched in the previous session, on growing optimism around the reopening of the Chinese economy. China, the world’s top crude importer, has been signalling a softer stance in the fight against the Coronavirus, raising hopes for a pivot in its strict zero-COVID policy, and lifting the outlook for growth and demand of the commodity. However, fears about a potential global recession, which will dampen demand, is keeping investors on edge. On the supply front, the expanded Organisation of the Petroleum Exporting Countries, OPEC+, decided to stick to their existing policy of reducing oil output by 2 million barrels per day from November through to 2023.

Gold eased toward $1 780/ounce on Thursday, erasing some gains from the previous session as the dollar advanced on renewed global recession fears. Investors are also waiting for more cues around the trajectory of US Fed rate hikes. Gold saw a monthly gain of 4.6%, while adding 0.59% year-on-year.

Copper futures rose above $3.80/pound, approaching the four-month high of $3.90/pound, traded on 11 November 2022. Prices are being supported by hopes of a pickup in industrial demand and looming supply concerns. Expectations of demand for industrial inputs in the US improved after Fed Chair, Jerome Powell, signaled that the central bank may slow the pace of rate hikes this month, while the Peoples’ Bank of China cut its reserve ratio by 25 basis points to stimulate the economy. On the supply side, lower output in South America continues to raise concerns of shortages in the near future, as top producer, Chile, mined 6% less copper in 2022, and mine protests in Peru hampered that country’s production. Copper prices saw a monthly advance of 5.1% but remains 10.17% lower year-on-year.


The US Dollar Index held above 105 on Thursday, after significant declines the previous week, where the greenback traded at a five-month low. On Thursday, the dollar benefitted from risk-off sentiment as renewed recession fears gripped financial markets. The greenback was also being supported by bets that the Fed will keep interest rates higher for longer, following the release of surprisingly strong US employment, services, and factory data. Investors are now looking ahead to US consumer inflation data next week, as well as the Fed’s policy meeting.

The euro traded around $1.05 for most of the week, close to levels not seen in five months, benefitting from general dollar weakness amid hopes the Fed will slow the pace of interest rate increases, while investors adjust bets for the next ECB move. Investors are getting increasingly confident the ECB will deliver a 50 basis point rate hike on 15 December, following two straight 75 basis point rate increases. ECB chief economist, Philip Lane, said that he is confident inflation is close to peak, but that more rate increases will be necessary. At the same time, ECB member, Costantinos Herodotou, told Bloomberg that eurozone rates will rise again, but were very near their “neutral level”.

The British pound was changing hands at $1.22, not far from an almost six-month peak of $1.23 reached earlier this month. The sterling has been buoyed, in part, by growing confidence that the UK is getting its spending and borrowing fiscal plans to align. At the same time, another key driver for the sterling’s rebound from September’s record-low of $1.04 was a sharp dollar depreciation in the previous week, amid prospects of a slowdown in the Fed’s aggressive policy tightening and concerns about the health of the US economy. Still, the outlook for the sterling remains clouded by fears of a domestic recession.

The South African rand was trading around the R17.20/$ mark, the strongest level in almost a week, on the back of stronger-than-expected domestic data. South Africa’s economy swung back to growth in the third quarter, dodging a technical recession, although the expansion was mostly driven by the agricultural sector and partly due to low base effects from the second quarter. At the same time, the threat of South African President Cyril Ramaphosa resigning from office over the Phala Phala scandal, has temporarily faded after his party vowed to support him at next week’s impeachment vote. On the monetary policy front, the South African Reserve Bank lifted the repo rate by another 75 basis points in November, marking the sixth consecutive hike in a year and it is poised to prolong its most aggressive interest-rate hiking cycle until it is confident inflation will return to the 4.5% target midpoint in its forecast horizon

The rand is trading at R17.12/$, R18.12/€ and R21.02/£.