Market Commentary – February 4, 2022

Kevin Jock

4th February 2022

U.S. stocks dropped decisively on Thursday in almost a year, with the S&P 500 index snapping a four-day rallies by falling 2.44%. The Nasdaq index lost even more, plummet 3.7%, its worst day since September 2020. Such massive decline was triggered by a disappointing earnings report from Meta, which cautioned more competition from rivals such as TikTok platform. Share price of Meta plunged by 26% and wiped more than $230bn off its valuation.

European equities fell on Thursday as well, following ECB’s hawkish tilted comments as they are likely to hike rates this year. The broad benchmark index EURO STOXX 50 tumbled nearly 2%, while both CAC 50 and DAX also dropped 1.5%. Tech stocks are among the worst performers, closed down 3.5% as Meta’s selling pressure reverberated across the markets.

In Asia, HK stock market opened high on Friday, with the Hang Seng Index once again above the 24,000 points after the Chinese New Year holiday. The Japanese market remained nearly flat in the morning session while the mainland Chinese market is still closed.

Price of oil continued to rally on Friday, extending the sharp gains from yesterday as severe weather hit U.S. which could further disrupt oil supplies, with the U.S. oil currently trading above $91 a barrel. Gold prices remain steady on Friday and looking to settle on a weekly gain due to a weaker dollar, trading at $1,806. Euro hiked significantly against the dollar after the ECB comments, settling at $1.14391 on last night as the dollar index is heading for its worst week in almost two years.

image_2022_02_04T03_19_53_428Z (1)

Figure 1 (Source: IS Prime) GBP/USD Daily : Cable positions higher following expected rate hike from the BOE.

Headliner to Review

  • BOE raises interest rates on Thursday from 0.25% to 0.5% with the Monetary Policy Committee voted by a majority of 5 to 4. Such rate rise is due to the current continuous inflationary pressure as the central bank forecasted that inflation would increase to 7.25% in April.
  • The ECB confirmed to keep interest rates unchanged in yesterday’s newly released statement, with the deposit rate stayed at a record low of -0.5% despite the record inflation.

Headliner to Watch

  • Employment change in Canada is expected to decline by 111.5K when the latest figures due in this evening, as well as an increase of unemployment rate to 6.2% from 5.9% in previous month, driven by omicron and related restrictions.
  • U.S. NFP data is forecasted to increase by 145K on this evening, however, such expectations could be dampened by the newly released ADP figures on Wednesday as U.S. companies shed 301K employees from payrolls in January as the pandemic caused a rapid blow to the local labour market.

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Authors:
Antony Tan
Kerry Man