Market Commentary – April 1, 2022

Kevin Jock

4th April 2022

The U.S. equity market rose moderately on the first day of April, with both the S&P 500 and Nasdaq indices advanced 0.34% and 0.29% respectively. The newly released NFP report showed strong job gains, which adds to the conviction that the Fed is likely to become more aggressive in increasing rates to curb inflation without slowing economic growth. Expectation of a 50-basis point rate hike stand at 73% at the central bank’s meeting in May.

Across the Atlantic, European shares advanced slightly on last Friday with the hike of bank stocks alleviated worries about economic growth and inflation. Russia has threatened to cut off gas supplies to Europe, unless paid with roubles. Thankfully it has been avoided as Moscow reaffirmed that they will not halt supplies until new payments are due later in April. On the other hand, the Chinese president Xi Jinping delivered a somewhat neutrality view towards the conflict during a video conference with the top EU officials, but the EU expect China to take its responsibility to assist in the accomplishment of a peaceful resolution of the war.

Asian share markets had a cautious start on Monday on the back of more potential sanctions against Russia. Japan’s Nikkei 225 is flat, while Australia’s ASX 200 is up slightly by 0.44%. The Chinese stock market will remain closed until Tuesday due to the local national holiday. The mega-city of Shanghai is still under stringent lockdown as the number of cases rose rapidly (8,581 additional asymptomatic cases as of Sunday), with the residents plead for food and medicine. However, nearly 100K medical forces from all-over the country has gradually arrived the city to battle the pandemic in a hope to clear the cases by 11th April 2022.

Oil price is flat on Monday morning, after it fell 13% last week when U.S. announced the largest-ever release of the oil reserves. Bullion price also dropped significantly last Friday as the U.S. unemployment rate fell more than expected, implied the economy is not as bad as it was and thus reducing investors’ needs of relying on safe havens. The Russian ruble appreciated against the dollar for nine days in a row, settled at 83.2 as of last Friday.

image_2022_04_04T03_28_43_946Z

Figure 1 (Source: IS Prime) USD/THB daily: Rising commodity prices strains the Thai Baht as the currency depreciates 2.7% in March and consequently weakening the nations current account balance.

 Headliner to Review

  • The U.S. labour market continued its recovery in March, with the NFP added 431K jobs, although less than the market forecast of 492K jobs. The biggest job gains came from the leisure and hospitality sectors as the U.S. economy recovered from the losses incurred during the pandemic. Unemployment rate ticked down more than expected, registered at 3.6%.
  • The U.S. ISM Manufacturing PMI index printed 57.1 in March, which has weakened versus 58.6 in February. Ongoing supply chain related issues and labour shortages contributed to such decline, as well as higher energy costs.

Headliner to Watch

  • Australia will announce their cash rate decision, with the RBA expect to maintain the rate unchanged at 0.10%.
  • U.S. ISM Services PMI index is forecast to register at 58.6 points, up from 56.5 points from the previous month.

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Authors:
Antony Tan
Kerry Man