Market Commentary – February 1, 2022

Kevin Jock

1st February 2022

Wall Street records its worst January monthly performance since 2020 despite a late rebound posting consecutive day of advances. Concerned that central bank rhetoric may have been interpreted to it’s extreme as markets price a 50-basis point hike in March following Fed Chair Powell’s remark last Wednesday. Monday saw reassurances by Kansas City Fed President George, that “it is in no one’s interest to try to upset the economy with unexpected adjustment” as well as from Atlanta Fed President Bostic noting “we’re not set on any particular trajectory. The data will tell us”. Particularly relevant as the OECD sees global inflation easing within the coming year and half. Nasdaq led the charge, up 3% whilst the S&P500 and Dow Jones rallied a notable 1.6% and 0.9%, respectively.

Performance was mixed across the pond as flash macroeconomic figures show a slowing Euro economy amid a dicey geopolitical situation risen from Ukraine and Russia’s standoff. Surging energy prices remain a concern as further sanctions on Russia could result in the Republic pushing global cost higher. The FTSE100 ended lower, whilst DAX managed to gain 0.4%.

Hong Kong closes shop as the territory celebrates Lunar New Year whilst the zero COVID policy fails with Omicron running amuck. Australia’s S&P200 rallies as the RBA leaves the cash rate unchanged whilst Japan’s Nikkei pars off yesterday’s gains slightly.

With FOMC members softening their hawkish undertone, the US dollar reversed Thursday’s gains. Both physical and digital gold bounced back with XAUUSD settling at 1,797 and bitcoin back above the 38,000 handle. Oil continues their relentless surge, closing once again at multi-year highs and recording their biggest January gain in over 30 years. Supply still the prevailing theme in driving prices higher.

AUDUSD-Feb-01-2022-03-52-21-30-AM

Figure 1 (Source: IS Prime) AUDUSD Daily : Differing degrees in monetary hawkishness see’s demand for the greenback outstrip the Aussie as the RBA is yet to expectation of future rate hikes.

Headliner to Review

  • Flash GDP data out of Europe saw growth slowing slower than expected at 0.3% with 0.4% being consensus. Weakness arose in Germany whom contracted in Q4.
  • As expected, the RBA announced a halt to its quantitative easing program though rates were maintained at 10 basis points as the central bank continues to evaluate the economic situation in Australia amid Omicron.

Headliner to Watch

  • Monthly GDP from Canada expected to reveal a slowdown from 0.8% to 0.4%.
  • Manufacturing PMI out of the U.S. anticipated to decline from 58.7 to 57.4.
  • New Zealand’s joblessness set to improve as the unemployment by consensus is to improve from 3.4% to 3.3%.

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Authors:
Antony Tan
Kerry Man