Market Commentary – February 28, 2022

Kevin Jock

28th February 2022

Wall Street stocks rallied on Friday after rebounding from losses following Russia’s invasion of Ukraine. Both the Dow and the S&P 500 indices ticked up by more than 2%, while the Nasdaq index gained 1.64%. Drugmakers Johnson & Johnson and Merck led the gains. Share prices of the financial firms went up as well.

European equities rose on Friday too, with banks leading a broad-based rally. UK’s FTSE 100 hiked by nearly 4%, while both the CAC 40 and DAX ascended over 3.5%. In Eastern Europe, while the Russian armies continue to advance and broken into Kharkiv, the U.S. and its western allies agreed to impose one of the toughest sanctions on both the Russian central bank and some of its biggest lenders, by removing them from the Swift messaging system, a nuclear bomb level sanctions among the financial sectors. Such enforcement has already caused fear among the Russian cities with people stormed cash machines and bank branches. Meanwhile, both Russia and Ukraine agreed to initiate peace negotiations in Belarus on the morning of 28th Feb 2022.

In Asia, markets broadly encountered downward pressure on Monday morning. Japanese shares dipped slightly on worries over sanctions on Russia as the Nikkei 225 index dropped 0.31% before the mid-day break. Likewise in HK, the Hang Seng Index fell sharply by 1.5% soon after the opening of the market. According to the latest virus case figures, total number of infected cases in HK increased by 26K on Sunday, with the death cases increased to 83.

Price of Brent crude once again surged past $100 per barrel, to the high of $103.57 on Monday morning, due to escalating sanctions against Russia, which in turn led Putin to put Russian nuclear forces on high alert. While gold price spiked above $1,900 per ounce as investors continue to seek out for haven asset. In contrast, the broader crypto market is struggling amidst rising geopolitical risk, with bitcoin price unable to break above the $40K resistance level, currently trading at $37.7K.

image_2022_02_28T03_39_42_850Z

Figure 1 (Source: IS Prime) EUR/CHF Daily : Swiss Franc falls towards lows made back in mid 2015, as demand for safe-haven asset in Europe intensifies amid Ukraine’s on-going invasion.

Headliner to Review

  • The U.S. Core PCE Price Index, which is the Fed’s favorite measure of inflation, came out to be 5.2% year-on-year (YoY) vs the expected figure of 5% YoY. This is the highest reading since July 1982 which indicates that the inflation is high, given that the Fed targets 2% for inflation.
  • U.S. consumer sentiment index picked up to 62.8 in late February, from 61.7 earlier in the month. Although such slight improvement was due to a pickup in outlook, but it still held at a decade low as inflation concerns remained elevated.

Headliner to Watch

  • The Reserve Bank of Australia (RBA) will announce their cash rate decision on Tuesday, it is unlikely that they will hike rates due to restrained wage growth and hence, expect them to keep rates at 0.10%.
  • The U.S. ISM Manufacturing PMI index is forecasted to reach 58, slightly higher than the prior month of 57.6.

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Authors:
Antony Tan
Kerry Man