Market Commentary – August 12, 2022

Kevin Jock

12th August 2022

The performance of U.S. equities is sort of mixed on Thursday as both the Dow and the S&P 500 indices closed flat, while the tech-heavy Nasdaq dropped slightly by 0.58%. The drop in PPI raised bets in futures markets that the Fed could possibly increase rates by 50bps only, instead of 75bps expected earlier in the week.

Across the Atlantic, European stocks edged up marginally yesterday, on the positive news that the U.S. inflation is cooling, with STOXX 50 indices rose 0.21%. However, extreme weather conditions still took a hit to the continent such as in Germany, in which they are struggling with deficient rainfall, which has in turn pushed up shipping costs resulted from lower water levels in the river.

In Asia, market performance is also mixed as the Australian blue-chip indices dipped 0.58% on Friday morning, while Japan’s Nikkei 225 index advanced 2.4%. HSBC’s largest shareholder Ping An has intensified their requirements to spin-off the bank’s Asian business, even under the condition where the bank is reluctant to do so due to the potential risks and costs involved.

In terms of commodities, Brent crude is on track for a weekly gain as it has already climbed more than 4% for the week, to partially recover from last week’s losses, currently at $94.4 per barrel. While price of both gold and bitcoin remain rangebound today, at $1,788.67 per ounce and $24K respectively.

USDMXN chart (2022.8.12)

Figure 1 (Source: IS Prime) USD/MXN daily: The Mexico central bank rose interest rates by 75bps at its August policy meeting, however, the reaction of the currency pair is muted as such decision is already priced-in.

Headliner to Review

  • U.S. PPI index decreased unexpectedly by 0.5% in July, the first time in more than two years as it is mainly due to a drop in energy costs.

Headliner to Watch

  • Japan will announce their newest GDP figure on next Monday, looking to expand at an annualized 2.7% in the three months through June as their economy is gradually returning back to the pre-pandemic size.
  • Newest retail sales figure in China is forecasted to hike by 5% year-on-year, compared to an increase of 3.1% the month before.

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Authors:
Antony Tan
Kerry Man