Market Commentary – January 11, 2022

Kevin Jock

11th January 2022

U.S. equities dropped significantly on Monday, with the Nasdaq index briefly falling into correction territory as a sell-off in Treasuries resonated across global financial markets. The sell-off has been propelled by surging yields on U.S. government bonds, as investors dump the debt in anticipation of tighter policy from the Fed, with economists at Goldman Sachs expect them to raise rates four times this year.

Across the Atlantic, European shares posted their biggest one-day drop since late November on Monday as rising bond yields weighed on the heavyweight tech sector, with the EURO STOXX 50 index fell by 1.54%. However, Credit Suisse rose 1.3% after traders cited media speculation about a possible sale or merger of the Swiss bank.

In Asia, Australian stocks fell on Tuesday, with energy and banking indices leading the decline, as total virus infections surpassing one million on Monday. Supermarkets and retailers in the country continued to face persistent supply chain constraints, which have threatened empty shelves for weeks to come. Elsewhere in HK, Hang Seng index was up before the mid-day close but dropped significant in the afternoon into the negative territory.

Price of Brent crude dipped slightly in yesterday to settle at $81.19 per barrel, while gold prices steady despite a continued Treasury yield surge, currently trading at $1,807. Bitcoin price briefly fell below $40K on Monday for the first time since September 2021.

image_2022_01_11T07_13_59_412Z

Figure 1 (Source: IS Prime) GBPUSD Daily : Cable swings back to the topside, reaching mutli-month highs as upbeat economic conditions consolidate demand.

Headliner to Review

  • In November 2021, the euro area seasonally adjusted unemployment rate was 7.2%, down from 7.3% in October 2021 and from 8.1% in November 2020.

Headliner to Watch

  • The widely followed U.S. CPI figure on Wednesday is forecast to rise 7% for the year through December and climb 0.4% from a month earlier. Such inflation surge underscores why U.S. officials are preparing for a quicker normalization of monetary policy than previously anticipated.
  • Chinese CPI is also due to release on Wednesday, expected to have cooled in December at around 1.7%.

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Authors:
Antony Tan
Kerry Man