Market Commentary – February 3, 2022

Kevin Jock

3rd February 2022

Divergence on Wall Street with the Dow Jones posting their 4 consecutive advances whilst Nasdaq plunges 1.7% during late session as Meta (Facebook) and Spotify announced disappointing quarterly earnings. The rare profit decline comes as Meta invests into virtual and augmented reality technology in hopes to see fruition building a metaverse.

European and UK broad-based benchmarks retreated ahead of monetary policy announcements scheduled on Wednesday. For the former, the ECB has continued to resist market peer pressure in considering hiking rates from historic lows. For the latter, the BOE has been relatively tight-lipped of their 2022 outlook. Though a rate-hike has been priced into the yields for this year. Meanwhile, the fall-out from the UK Prime Minister’s party scandal worsens as another 3 Tory MPs decline their “no-confidence”.

In response to a potential invasion into Ukraine by Russia, global geopolitical escalate as US President Biden greenlight the deployment of 2,000 troops into Germany, Poland and Romania. The response comes amid stalemate diplomatic efforts with Russia whom have increasingly shown a buildup of Russian military around Ukraine. Russian President Putin has accused the US of drawing his country into war.

Hong Kong still closed for Lunar New Year, whilst profit-taking see’s Australia and Japan retreat. The American greenback snapped a 3-day retreat and gold edged higher to $1,806. Bitcoin fell to towards the $37,000 handle following a hack on blockchain bridge Wormhole without over $326M, likely irretrievable.

Crude oil traded lower but still near recent highs at $88 following OPEC+’s announcement to hike output by 400,000 barrel a day. An increase widely expected by analyst with futures contracts still in backwardation alongside doubts the cartel can even lift output considering prevailing global supply interruptions.

UK100-3

Figure 1 (Source: IS Prime) IDX.UK.100 Daily : Unlike their US counter-parts, the UK’s market’s have remained resilient against external impacts as well internal political disruptions.

Headliner to Review

  • US ADP non-farm’s came in much worse than expected with 301K American’s losing jobs as Omicron affects employment conditions.

Headliner to Watch

  • BOE set to release their monetary policy statement with an expected decrease in quantitative easing and a 25 basis point hike.
  • ECB is expected to leave rates unchanged at historic losers as their outlook for inflation is set to weaken in 2022.
  • US ISM services data to decline from 62 to 59.5 as Omicron’s outbreak continues affecting overall consumer sentiment.

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