Market Commentary – April 12, 2022

Kevin Jock

12th April 2022

Ahead of US CPI data scheduled Tuesday, pessimism looms with Wall Street tumbling as price pressures set to unveil an annual rate above 8%. Solidifying recent hawkish remarks by historically dovish Federal Reserve members. Increasing chances of a 50 basis point hike alongside aggressive reductions in quantitative easing. Nasdaq led the declines down 2.5%, whist a relative value rotation in favour of growth saw Dow Jones’ lose 1.2% only.

Geopolitical tensions still at the forefront of headlines as Russia redeploy concentrated forces towards Ukraine’s Donbas region following a retreat from the capital city, Kyiv. Despite this, oil continues to decline briefly touching below $95 almost giving up all its’ gains since Russia’s invasion into Ukraine. Overall global demand outlook hit a roadblock after authorities implemented strict lockdown protocols in Shanghai in a bid to stifle the recent outbreak. Now, the southern city of Guangzhou remarked they too will implement mobility curbs to slow-down cases.

Broad-based benchmarks across UK and Europe followed their American counterparts with the FTSE100 down 0.7 and STOXX lower by 0.6% respectively. Monetary tightening in the US, combined with weak monthly production figures in the UK portrays central banks with their hands tied in combating a non-transitory inflation alongside a bleaker global growth outlook. Meanwhile, the French CAC held firm, down only 0.1% after the first round of President elections ended with Incumbent Emmanuel Macron set to face off with Marine Le Pen in two weeks.

Asia opened weaker with the Hang Seng and S&P200 gapping lower whilst the Nikkei fell 1.5% intraday. For the former two, elections grace headlines. Recent polling suggest Australia’s Prime Minister is set to lose to opposition leader Anthony Albanese. And in Hong Kong as Carrie Lam steps down from the nation’s top role, John Lee is expected to reign supreme. Investors sought demand for the US dollar across the board as treasury yields hit levels unseen since 2018. Gold briefly surpassed 1,969, whilst bitcoin plummeted below 40K.

Oil

Figure 1 (Source: IS Prime) SPT.CO.US daily : Slower demand implication out of China reigns supreme on the price of oil as social curbs in Shanghai and potentially other provinces impede oil demand.

 Headliner to Review

  • Leading indicators out of the UK came in weaker than expected as monthly growth slowed to 0.1% with construction and production unexpected contraction for March.
  • German final monthly CPI came inline at 2.5% however WPI, the change in price of goods sold by wholesalers rose dramatically to 6.9& compared to 1.4%.

Headliner to Watch

  • ZEW economic sentiment expected deepen from -38.7 to -46.5 as continuing war in Ukraine sours outlook with inflationary pressures still elevated.
  • All eyes on US CPI data expected to increase monthly from 0.8% to 1.2%. If forecast come to fruition, annual CPI would rise above 8% and spur on hawkish monetary endeavours
  • FOMC Member Brainard is expected to speak at an online event hosted by Wall Street Journal. Brainards hawkish remarks of recent weeks was the impetus of Wall Streets tumble.

Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice.

Authors:
Antony Tan
Kerry Man