Market Commentary – February 18, 2022

Kevin Jock

18th February 2022

U.S. equity markets tumbled on Thursday with all the major indices down by over 2%. The Dow has dipped 620 points, the largest decline in three months. Such dramatic stock market volatility was caused again by the escalation of the Eastern Europe tension, where U.S. President Joe Biden said that Russia is on the brink of invading Ukraine. While In return, Russia has expelled the U.S. ambassador in Moscow.

In Europe, stocks across various nations dropped as well on the back of aforementioned crisis, with both FTSE 100 and DAX slid 0.87% and 0.67% respectively. Travel stocks are the worst performers as the sub-index dropped 1.7%, fearing that such geo-political conflict could potentially hinder the recovery of the sector, especially to airline shares. However, there are still some positive news among the corporate earnings reports, which has beaten analysts’ profit estimates including Commerzbank, its share price increased 3.2% on better-than-expected Q4 earnings.

Australia shares fell on Friday, following the global sell-off on the back of geo-political tension with the benchmark ASX 200 index dipped 0.5% during the Asian morning session. Both the Chinese stocks and HK’s Hang Seng index are down marginally before the mid-day break, with China’s top finance minister vowed to cut corporate tax rates more forcefully ahead of the Communist Party’s 20th party congress.

Oil price retreated on Friday, as the prospect of extra supply from Iran outweighed fears of the Russian conflicts, with the U.S. indicates the talk with Iran over a new nuclear agreement is in the final stages. Gold price has jumped significantly to temporarily break through the $1,900 level but it then retraced back slightly, as investors are flowing into the traditional safe-heaven assets to hedge risks. The Chinese Yuan has again strengthened against the dollar in this week, settling at 6.33349 yesterday. Meanwhile, over $300K worth of digital Yuan is transacted daily at the Beijing Winter Olympic Games.


Figure 1 (Source: IS Prime) USD/CHF : Demand for safe haven currencies leaves the USD dollar and Swiss franc in a tug-o-war as the USDCHF consolidates between the 0.91 – 0.93 range.

Headliner to Review

  • The Fed meeting minutes showed concern about inflation, with the FOMC members noted that inflation has beginning to spread into the broader economy and put burden on U.S. households. Consequently, plans are set into motion in terms of raising interest rates and shrink balance sheet, which could occur as soon as March.
  • Unemployment rate in Australia came out to be 4.2%, in line with expectations. While employment gained 12.9K in January as the market had been expecting a flat print.

Headliner to Watch

  • Series of flash manufacturing PMI data are due to release on Monday, across various developed nations including Australia, Japan, France, Germany, Eurozone, and UK.

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Antony Tan
Kerry Man