Market Commentary – January 27, 2022

Kevin Jock

27th January 2022

U.S. stocks trended lower on yesterday afternoon, after the Fed chair signaled that they would start to raise interest rates at its next policy meeting in March. Both the S&P 500 and Nasdaq indices reversed earlier gains to close at a near flat level. Such reversal is the biggest downward turn since Sep 2020. One exception is the tech heavyweight Microsoft, which closed up by 2.2% after it published an upbeat financial forecast which in turn, helped to lift the whole Nasdaq index.

European equities rallied on Wednesday before the announcement of the Fed policy meeting, with all the major regional indices in green with both the CAC 40 and DAX rose by more than 2% at the market close. Share price of BioNTech gained 2.7% after their announcement of a joint clinical trial with Pfizer, to test a new version of the vaccine that is designed specifically for the Omicron variant.

In Asia, stock indices of all the major markets fell on Thursday, after the Fed policy meeting as well as the recent geo-political tensions in Eastern Europe, as investors are worried about the tight energy market supply. Japan’s Nikkei 225 index dropped by 2.55% at the mid-day break, while HK’s Hang Seng index slid by 2.3%.

Oil price breached the $90 per barrel level, first time ever since Oct 2014, due to both the strong demand and constrained supply-side issues. Bullion edged lower on Thursday, following the extended losses overnight from a more hawkish than expected Fed, currently trading at $1,817 per ounce.

image_2022_01_27T03_46_52_082Z

Figure 1 (Source: IS Prime) EURUSD Daily : Disparity in monetary policy approaches between the Federal Reserve and European Central Bank leaves demand for the Euro lackluster as it approaches recent lows.

Headliner to Review

  • Bank of Canada (BoC) has kept its overnight rate unchanged at 0.25% and removed its exceptional forward guidance on its policy interest rate.
  • U.S. crude oil inventories unexpectedly rose by 2.4M barrels on last week, much higher than the forecasted figure of 1M barrels, as refinery activity has dropped to the lowest level since early November 2021.

Headliner to Watch

  • German preliminary quarterly GDP is due to announce on tomorrow, expect to contract slightly by 0.3%.
  • U.S. Core PCE Price Index is forecasted to increase by 0.5%, which is due to release on Friday as well.

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Authors:
Antony Tan
Kerry Man