Market Commentary – April 22, 2022

Kevin Jock

22nd April 2022

The U.S. equity markets were sold-off during the second half of the trading session to end in red territories yesterday, erased their gains in the earlier sessions completely. All the major indices were down, especially the tech-heavy Nasdaq in which it has dropped over 2%, as the rising yields of the Treasuries dented tech stock’s future prospects, and at the same time that the Fed chair made a hawkish tilted comment. On the other hand, Tesla CEO Musk has secured $46.5bn from various financial institutions to fund the Twitter bid, with the offer of $54.20 per share.

Across the Atlantic, European shares advanced to two-month highs on Thursday, with the French stocks lead the gains as Macron maintained his lead in polls before the Sunday’s election runoff. France’s CAC 40 closed up 1.36%, which made it to hit a three-week high, while Germany’s DAX rose nearly 1% as well. Bank stocks have gained the most on the week following expectations of a potential interest rate hike from the ECB, as mentioned by their vice president that a rate raise could occur in July. Meanwhile, Putin has ordered Russian troops to block off the remaining Ukraine fighters at the Mariupol steel factory and claimed that Moscow has conquered the port city.

Asian stock markets fell broadly on Thursday. Both Australia’s ASX 200 and Japan’s Nikkei 225 indices tracked Wall Street’s overnight weakness to drop 1.55% and 1.89% respectively at the mid-day break, while HK’s Hang Seng Index continue to decline by 0.8%. Meanwhile, the prolonged lockdown in Shanghai and its negative impact on the world’s second largest economy has also weighed on both the Chinese stocks and currency, as the Shanghai Composite Index have already dropped for almost three days.

Price of oil fell on Friday, heading for weekly declines of around 3.7% due to a variety of factors, including weaker global growth and pandemic lockdowns in China which hurt the overall demand. WTI crude is currently trading at $103 per barrel, being the least volatile week since the inception of the Russian invasion in late February. Gold continues to trade in range-bound, settled at $1,951.29 last night, while the Chinese yuan hit a fresh seven-month low of 6.49135 in early trade onshore today.

image_2022_04_22T05_19_57_709Z

Figure 1 (Source: IS Prime) CAD/JPY daily : US tech down-beat defenseless against rising treasury yields and pessimistic outlook as global economies return to norm.

Headliner to Review

  • The New Zealand CPI in the March 2022 quarter rose 1.8% compared to the December 2021 quarter, with both the food and the transport sectors being the two major contributors. Such pace of increase is the fastest in 32 years, which validated the central bank’s decisions to pursue an aggressive tightening cycle.
  • Fed chair Powell said on Thursday that they are committed to raise rates expeditiously to deter inflation, and he reaffirmed the fact of a 50bps increase for the May meeting, which is in line with market expectations.
  • BoE governor Bailey said that they are facing a conundrum in tackling inflation and at the same time of trying to avoid a recession due to rate increase.

Headliner to Watch

  • The second-round run-off vote of the French presidential election will be conducted on this weekend, in which France will decide whether to give Macron a second five-year term or choose Marine Le Pen as the new president.
  • German ifo Business Climate Index is due to release on next Monday, previously the figure came out to be 90.8 points.

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Authors:
Antony Tan
Kerry Man