Market Commentary – February 22, 2022

Kevin Jock

22nd February 2022

U.S. equity and bond markets are closed for a public holiday as of today. It will reopen tomorrow, however, market conditions seem to be quite pessimistic due to the current escalating tensions in Eastern Europe.

European shares dipped sharply on Monday, with all the major indices down by nearly 2%, including the broad benchmark index EURO STOXX 50. Moex share index in Russia took a hard hit as it plummets by 10.8%, its worst single-day decline since the Crimea crisis back in 2014. Russia’s president Putin has order troops to enter rebel-held regions in Eastern Ukraine and pronounced the independence of both the Luhansk and Donetsk regions. Such pronouncement has encountered fierce condemnations from the Western allies, with the U.S., UK and France planned to implement sanctions against Russia. Meanwhile further to the west, UK’s prime minister Boris Johnson has announced that England will revoke all the necessary preventive measures of constraining the pandemic, in order to live with COVID-19.

In Asia, stock markets across major economies broadly sold-off on Monday morning, Australia’s ASX 200 and Japan’s Nikkei 225 indices all dropped over 2% at the mid-day close. While HK’s Hang Seng index and the Chinese stocks opened low and further dipped into more negative territories, caused by the aforementioned Ukrainian crisis which negatively affected investors’ moods and made risky assets become unattractive.

Brent crude surged nearly $3 per barrel as of yesterday to settle at $97. The big question now is whether a Russian invasion could potentially disrupt energy exports, should such prospects continue, volatility of the oil prices may rise further. Gold prices continue to go up as the geo-political crisis deepens, trading at $1,907 per ounce. Japanese Yen hit a near three weeks high to around 114.5 per dollar during today’s morning trading session, as investors seek for safe-haven assets.

image_2022_02_22T05_24_00_171Z

Figure 1 (Source: IS Prime) CC.BTC.USD : Bitcoin tumbles lower to the 36,000 handle as the digital-gold fails to prove its worth as an alternative to its traditional physical counter-part.

Headliner to Review

  • German Flash Services PMI turn out to be 56.6 vs. expected 53.2. Business activity is growing at the fastest rate for six months in February, across Germany’s private sector as improving demand outweighs the consequences of a fresh wave of infections caused by the virus variant.
  • Services PMI in the Eurozone has also hiked to 55.8 in February, more than the forecasted figures. Such increase is caused by the accelerations of the Eurozone business activities as the COVID-19 restrictions were relaxed. Prospects of new orders and job growth improved as well.

Headliner to Watch

  • New Zealand’s central bank RBNZ will announce its rate decision on tomorrow, with the market believing that they will raise interest rates by 25 basis points to 1%, to further restrain inflationary pressure. The local labor market is very tight at the moment as the jobless rate is at a record low of 3.2%.
  • Final CPI in the Eurozone is forecasted to be 5.1%, in line with the figures from the previous month.

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Authors:
Antony Tan
Kerry Man