Market Commentary – April 25, 2022

Kevin Jock

25th April 2022

U.S. equity markets dropped significantly on Friday which resulted their worst day in months due to growing concerns of more aggressive rate hikes by both the Fed and the ECB. The blue-chip S&P 500 index tumbled 2.82%, the biggest loss since March, while the Dow plummet nearly 1,000 points which was the 11th largest single-day drop in history. Meanwhile, the Vix volatility index climbed to a one-month high of 28.3.

European stocks also took the hit on last Friday as it closed at near one-month low due to a variety of negative factors including China’s pandemic lockdowns, as well as rapid interest rate hike prospects which subdued global market sentiments. All the major European stock indices declined, with FTSE 100, CAC 40 and DAX indices fell 1.39%, 1.99% and 2.48% respectively. According to the latest poll, Macron defeated Le Pen to be re-elected for a second term of the French president. On the other hand, Putin has lost interest in diplomatic efforts to end the war and instead, seems he is more inclined to seize as much Ukrainian territory as possible and such aggression is pushing both Finland and Sweden into NATO.

Across Asia, the Australian market is closed today due to the local holiday. While the relevant performances of the other major markets are downbeat, echoing the poor performance from Wall Street last week. Japan’s Nikkei 225 index fell almost 2% at the mid-day break, and HK’s Hang Seng Index dipped 2.55%. In Mainland China, 41 COVID cases are detected in Beijing and looks like has already been spreading for the past one week secretly. In Shanghai, local authorities have further escalated the already Draconian measures of the lockdown through fencing off apartment building entrances to further limit movement in the city.

WTI crude has dropped below $100 a barrel to currently trade at around $99.5 as of the Asian morning session on Monday. Bearish sentiment outweighed concerns over tight global supply as both the lockdowns in Shanghai and U.S. rate hikes hurt fuel demand. Both the price of bullion and bitcoin are declining in the recent days as well, with gold price now at $1,922.78 per ounce, while bitcoin has dropped below $40K.

image_2022_04_25T03_49_14_458Z

Figure 1 (Source: IS Prime) IDX.HK.50 daily : Hang Seng down-beat mirroring Nasdaq, despite policy makers in China announcing stimulus packages for 2022 to boost economic activity.

Headliner to Review

  • The German Flash Manufacturing PMI index declined in April to registered at 54.1, down from 56.9 from the previous month as manufacturers continued to face severe supply chain disruption throughout April, due to the war in Ukraine and COVID-related lockdowns in China. However, its Flash Services PMI index were up when compared to the figures from last month, at 57.7. This is due to the further recovery in demand from the services firm as pandemic related restrictions are eased and more inflows of new businesses.
  • The U.S. Manufacturing PMI posted 59.7 in April, up from 58.8 in March. Such increase shows the strongest overall growth for seven months as both output and new orders continue to rise at a faster pace during April.
  • Retail sales volume in UK continue to decline in March, by 1.4%, with the largest contribution of the fall came from non-store retailing in which it dropped 7.9% over the month.

Headliner to Watch

  • The Japanese CPI figure is due to release on Tuesday, forecast to increase by 1.1% on a year-to-year basis. If the final figure come out to be exceptionally high, then the Bank of Japan could make a slightly hawkish tilt to its policy guidance at its next meeting.
  • The U.S. CB Consumer Confidence index is expected to be 108.5, up from 107.2 in previous month as solid job gains and the resume of wage growth contributed to the uptick.

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Authors:
Antony Tan
Kerry Man