Market Commentary – January 19, 2022

Kevin Jock

19th January 2022

Missed earnings from Goldman Sachs (GS) negatively impacted U.S. equity markets. The Dow lost 500 points, down by 1.5%, while the Nasdaq dropped 2.6%. Shares in GS fell 7% on Tuesday, their largest daily fall since June 2020, after the investment bank’s quarterly earnings undershot analysts’ forecasts. Meanwhile, Activision Blizzard shares jumped after Microsoft agreed to buy the video game maker, paying the enormous sum of nearly $70bn for the deal.

European shares closed at a one-week low on Tuesday, with tech stocks losing the most due to expectations of U.S. rate hike by the Fed. Both the CAC 40 and DAX indices lost nearly 1% at the market close, while tech stocks declined 2.2%, the most among their peers.

In Asia, Australian shares fell on Wednesday to their lowest close in a month, weighed down by tech stocks after a spike in U.S. Treasury yields, with the benchmark index ASX 200 dropped by 1% at the market close. China stocks fell too, dragged down by electric vehicle makers and healthcare firms as investors booked profits, with the blue-chip CSI 300 closed down 0.58% at the mid-day break.

Oil prices rose for a fourth day on Wednesday, with Brent crude settled at $88.56 yesterday. Gold was down on Asia morning and was near the one-week low hit during the previous session, while the dollar index edged higher in this week as Treasury yields hit a new two-year high on their return from a long weekend break.

image_2022_01_19T07_17_33_288Z

Figure 1 (Source: IS Prime) USD/HKD Daily : Hong Kong dollar approaches the middle of the band as differences in approaches to fighting COVID see’s greater economic confidence in the US.

Headliner to Review

  • The Bank of Japan (BoJ) kept its negative interest rate, bond yield target and asset purchases unchanged at the end of its meeting Tuesday. But changed its view of the inflation risks they face. Such adjustment is also widely expected which signals that the bank now sees the possibility of inflation outstripping their projections.
  • The ZEW Indicator of Economic Sentiment for Germany increased significantly in the current January 2022 survey, climbing 21.8 points to a new reading of 51.7 points.

Headliner to Watch

  • Australia will announce its unemployment rate on Thursday, expect to drop further to 4.5% from the previous month of 4.6%.
  • U.S. existing home sales and housing starts data will be released on Thursday as well, with consensus estimates currently point to a figure comparable with the prior month for December existing home sales.

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Authors:
Antony Tan
Kerry Man