Market Commentary – February 17, 2022

Kevin Jock

17th February 2022

U.S. stocks on Wednesday trended lower for the first half of the trading session but ended to close nearly flat by the end of the day, with both the Dow and Nasdaq indices down marginally by 0.16% and 0.11% respectively. The Fed minutes showed that the central bank is determined to combat high inflation, but some officials also worried about the potential risks of tightening the policy too rapidly.

Across Europe, markets also remained cautious with all the major European indices down slightly on concerns of the Eastern European front, as the White House claimed that the withdrawal of Russian troops are false. NATO also commented that they have not seen any de-escalation but instead, Russia has built-up about 150K troops on its border with Ukraine. Moscow has denied NATO’s assessment which further blurred the truth as there is a tug of war between the Western allies and Russia. A two-day Security Conference is about to commence in Munich which will be attended by several western allies, hopefully it will provide some insights on this conflict which has already shocked the world.

Performance of the Asian markets tend to be mixed during the morning trading session, with the Australia’s ASX 200 indices up by 0.5% on the back of resilient job data. Japan’s Nikkei 225 slid 0.14% at the mid-day break, while HK’s Hang Seng index is up by 0.2%. Meanwhile, the number of Covid cases continue to surge in HK, which it has increase by 5,000 new cases as of today.

Oil prices dropped yesterday on the back of positive Iran nuclear negotiation news, which could possibly relief global oil prices through potential increased supplies to reduce the supply-demand deficit. However, it has thus rebounded in today’s trading session after Russian-backed rebels in Eastern Ukraine accused Kyiv government forces of shelling their territory with mortars, as the oil markets have been dominated by such geo-political conflicts in recent weeks. Gold price has bounced back from Tuesday’s sell-off, nudging higher to test November’s high at around $1,877.12 once again. Cryptocurrencies are recently under greater scrutiny as the Financial Stability Board (FSB), a global financial watchdog, has urged policymakers to implement rules quickly to contain crypto risks.

image_2022_02_17T07_18_44_144Z

Figure 1 (Source: IS Prime) USD/RUB : Accusations of mortar fire from Ukrainian forces spooked markets in to a flight-to-safety intra-day as the US dollar gained against the Russian rubble.

Headliner to Review

  • U.S. retail sales figure jumped up more than expected, with an increase of 3.8% in last month compared to economists’ forecast of 2.1%. Such jump is due to higher inflation and online shopping demand with sales at non-store retailers had the largest hike.
  • Headline UK CPI has reached 5.5% as of yesterday’s release, which is above market expectations which could entice the markets to believe further rate hikes by BoE in both March and May.

Headliner to Watch

  • Japanese core CPI is due to release on Friday, expected to increase by 0.3% compared to 0.5% from previous month, the acceleration is most likely due to food and energy prices.
  • Monthly retail sales will announce in both UK and Canada, with the forecasted figure of +1.1% and -2.1% respectively.

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Authors:
Antony Tan
Kerry Man