Market Commentary – August 18, 2022

Kevin Jock

18th August 2022

Wall Street stocks ended the day lower on Wednesday, with indices being volatile after the release of the Fed’s meeting minutes in July. Both the S&P 500 and Nasdaq indices dipped 0.72% and 1.25% respectively. The Fed minutes showed policymakers are committed to keep interest rates high in order to tame inflation, however, traders think they will be more likely to hike rates by 0.5% in September.

Across the Atlantic, European shares declined on Wednesday and bond yields shot up after the release of UK inflation data, which turns out to be higher than the forecasted figure. All the major European indices were down on the day especially DAX, in which it tumbled by over 2%. Nearly 20 ships are stuck in traffic along Germany’s river Rhine due to engine failure of one of the ships, with such troubles add to pressure on the German industry.

In Asia Pacific, regional equities tracked the overnight performance of Wall Street and went lower on Thursday morning. Japan’s Nikkei 225 index dropped 0.82% before the mid-day break, while HK’s Hang Seng index dipped 0.67% to around 19,792 points.

Brent crude bounced back a bit in the recent days after hitting six months low at $93.023 per barrel. Price of gold continues to fall, and it has closed below the crucial level of $1,780 since yesterday. We could see more losses if investors gradually rotate into the U.S. dollar. Meanwhile, AUD/USD dropped after a downbeat jobs report that saw 40.9K jobs lost for July.

Nikkei 225 chart (2022.8.18)

Figure 1 (Source: IS Prime) Nikkei 225 daily: The Japanese blue-chip index rose above the key psychological level of 29,000 points on Wednesday for the first time in more than seven months, as upbeat U.S. equities boosted investor sentiment.

Headliner to Review

  • The Reserve Bank of New Zealand has hiked cash rate from 2.5% to 3% in an attempt to rein in inflation, which is widely expected by the markets.
  • UK CPI data came out to be hotter than expected at 10.1% y/y against 9.8% expected as food prices continue to increase. It is also the first time of registering a double-digit annual increase in more than four decades.

Headliner to Watch

  • UK retail sales figure is expected to post on Friday, looking to decline by 0.2% month-to-month.

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Kerry Man