Market Commentary – August 22, 2022

Kevin Jock

22nd August 2022

Wall Street equities fell on Friday in a broad selloff to snap four weeks of gains, with the blue-chip S&P 500 lost 1.3%, while the tech-heavy Nasdaq indices declined over 2%. Mega cap stocks including Apple and Amazon are the biggest laggard of the indices as investors are still concerned about the Fed’s aggressiveness of hiking rates.

Across the Atlantic, European shares underperformed on Friday as well and end up with a weekly loss, including STOXX 50 as its six consecutive weekly gains reached an end. An unexpected huge jump of the German producer prices in July gloom the markets as the war in Ukraine pushed up the costs including energy prices.

Asian stocks skid on Monday morning as global bond yields climbed last week, with the U.S. ten-year treasury yield rose to nearly 3% once gain. Both the Australia’s ASX 200 and Japan’s Nikkei 225 indices dropped 0.85% and 0.64% respectively. Meanwhile, Taiwan is set to welcome more foreign delegations this week, despite pressure and angers from China.

Oil price remained flat on Monday, with reports suggesting that Iran and Western countries are close to strike a deal to lift sanctions on crude supply. Bullion slipped further on Monday due to the uncertainty of the Fed’s monetary tightening, with its price fell to $1,747.71 per ounce. In contrast, the U.S. dollar index hit a fresh five-week high after the Fed official delivered hawkish comments ahead of this week’s Jackson Hole symposium.

USDCNH chart (2022.8.22)

Figure 1 (Source: IS Prime) USD/CNH daily: The Chinese Yuan dipped to its lowest level in nearly two years after its central bank cut key lending rates, as well as the fact that the greenback appreciated recently on the back of Fed’s hawkish comments.

Headliner to Review

  • UK retail sales printed an increase of 0.3% m/m in July, versus a 0.2% decline expected. Such increase is surprising given the huge burden consumers face from higher energy bills and living costs.
  • Retail sales in Canada increased 1.1% in June, the sixth consecutive increase with higher sales at petrol stations leading the indicator.

Headliner to Watch

  • The consumer confidence index is due to release in the EU on Tuesday, forecasted to drop further at -28 points.

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Kerry Man