Market Commentary – April 26, 2022

Kevin Jock

27th April 2022

U.S. stocks rebounded late on Monday after a massive sell-off from last Friday, with the broad benchmark S&P 500 closed up by 0.57%. The tech-heavy Nasdaq indices were up 1.29% as traders believe the recent sell-off is a good buying opportunity ahead of a busy week of earnings report. Meanwhile, Twitter’s board has accepted Elon Musk’s $44bn offer to acquire the whole company, as the richest man in the world looking to control the influential social media platform.

European stock indices dropped broadly on Monday, dragged by commodity shares as the sub-sector slumped 6% on worries of economic slowdown in China, with Beijing on the verge of joining Shanghai in pandemic-related lockdowns. Both the FTSE 100 and DAX indices were down by 1.88% and 1.54% respectively, while France’s CAC 40 declined 2% as Sunday’s election results were overshadowed by the downbeat market sentiment. Moreover, in Eastern Europe, some top U.S. officials flied to Kyiv to meet the Ukrainian president Zelensky in a pledge to offer $322mn in military funding.

In Asia, market performance is mixed on Tuesday morning. Australia’s ASX 200 indices dipped almost 2% after coming back from the local holiday, with the miners led the decline which dragged the benchmark to a five-week low. Japanese shares rose slightly to track Wall Street gains overnight, however, concerns over the lockdown in China capped their ascend. Likewise, both the Chinese and HK equities recovered partially from yesterday’s huge losses, to advance 1.41% (CSI 300 Index) and 1.89% (Hang Seng Index) respectively at the mid-day break. The Chinese central bank (PBoC) decided to lower the forex deposits reserve requirement ratio (RRR) by 1% starting from 15th May, which signals the market that they do not want to see a rapid depreciation of the RMB.

Oil price stabilized from the recent decline, with the price of Brent crude settled at $102.817 per barrel yesterday. Gold price dipped below $1,900 per ounce but managed to recover from the losses to currently trade at $1,903.50. U.S. dollar rallied to its highest level since March 2020, with the dollar index rose to a high of 101.86 as higher interest rates attracted investors to purchase more dollar-denominated investments. On the other hand, Indonesia banned the exports of edible oil which has further exacerbated the global food inflation threat as they are the world’s biggest exporter of palm oil.

image_2022_04_26T05_33_32_913Z

Figure 1 (Source: IS Prime) AUD/USD daily : Monetary policy divergence sees the Aussie weaken as Fed hawks set expectations of aggressive tightening in the U.S.

Headliner to Review

  • German ifo Business Climate Index increased to 91.8 in April, from 90.8 in March. Although the local businesses have become more optimistic about future prospects, however, it is still too early to see as the uncertainties are still yet to confirm including supply-chain disruptions and high inflation.
  • Bank of Canada (BoC) governor Macklem said the central bank will consider another 0.5% hike of interest rate to counter inflationary pressure as he spoke to the lawmakers in Ottawa on Monday.

Headliner to Watch

  • CPI in Australia is due to release on Wednesday, it is expected that the preliminary reading of quarterly CPI to be 1.7% against the previous figure of 1.3%. A higher inflation print could force the Reserve Bank of Australia to become hawkish when it comes to interest rate decision since they have not lifted the rate yet.
  • U.S. pending home sales figure is forecasted to contract by 1%, month-to-month.

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Authors:
Antony Tan
Kerry Man