Market Commentary – August 23, 2022

Kevin Jock

23rd August 2022

U.S. stocks dropped sharply on Monday as it encountered the biggest decline in two months, on fears that the Fed could adopt a hawkish tone at the Jackson Hole symposium this week. All the major indices dipped 2% on the day, with declines across every sector and especially tech stocks as it were the worst hit.

European equities also suffered on the day as it fell to their lowest level in nearly one month. Apart from FTSE 100, all other major indices dipped nearly 2% as well. Gas supply constraints from Russia is certainly one of the factors that caused the slump of stock prices, but also hawkish signals from the ECB have also weighed on investors’ minds.

In Asia Pacific, regional shares dropped on Tuesday morning such as Japan’s Nikkei 225 index, in which it dipped over 1%. HK’s Hang Seng Index fell slightly at 0.42% to 19,576.04 points. In China, authorities have stepped up emergency measures to deal with extreme heatwaves in the Southwest regions by forcing cities to dim lights, as well as suspending power supplies to a number of factories.

Price of Brent crude rebounded on the day, after Saudi Arabia said that OPEC could cut output to correct a recent drop in oil futures. In contrast, gold price continues to fall, and it is now below $1,750 as both the dollar and treasury yields could rise further. Likewise, euro slumped against the greenback as heightened fears that the region’s major economies would slide into recession, currently trading at $0.9940.

AU200 chart (2022.8.23)

Figure 1 (Source: IS Prime) ASX200 daily: The Australian shares posted worst day in six weeks on Monday, in a sector-wide selloff driven by heavyweight mining and financial stocks.

Headliner to Review

  • New home prices for Canada increased 0.1% in July compared with June, below the forecasted figure of 0.3% increase as lower demand curbed new home prices nationally.

Headliner to Watch

  • U.S. durable goods orders is forecasted to hike marginally by 0.9% m/m.
  • Pending home sales figure is expected to drop further by 2.6% in the U.S., on a month-to-month basis.

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Kerry Man