Market Commentary – March 04, 2022

Kevin Jock

4th March 2022

Equity market in the U.S. declined by the end of Thursday’s trading session, with traders and investors continue to contemplate on the economic impact of the conflicts in Ukraine, as well as the potential shift of policy from the central bank. Fed chair Powell mentioned that the war and sanctions against Russia could cause upward pressure on inflation for an extended period of time. The Nasdaq index dropped 1.56%, while the blue-chip S&P 500 index fell 0.53%.

Across Europe, all the major indices were under broad sell-off condition as of yesterday, with London’s FTSE 100 index slid more than 2.5%. The continue rally of the commodity prices squeezes real incomes, which in turn negatively impact on consumer sentiment. The boost of mining sector is unable to resist a larger sell-off among the other sectors, especially both the travel and retail stocks as they led the decline. To the East, Russian forces has controlled Mariupol, a Ukrainian port in the Southern part of the country which has now been cut off from global shipping. However, there are also positive news as the second round of talks between the two countries concluded on Thursday, whereby both sides agreed to create humanitarian corridors for those residents escaping besieged cities.

In Asia, markets broadly suffered on Friday morning, tracking Wall Street’s overnight losses. The Japanese Nikkei 225 index dipped nearly 2.3% at the mid-day break, while HK’s Hang Seng Index opened below 22,000 points, a new low since the era of the pandemic back in March 2020. Its corresponding tech stocks are the major laggards as investors continue to dump high risk growth stocks under such geo-political turmoil.

Oil price seems settled down a bit on Friday, but it still remains at a seven year high of $113.20 a barrel, on fears that Western sanctions could disrupt shipments from Russia. Gold has set on its best weekly gain since May 2021, as it is currently up on today and trading at $1936.45. Euro is continually encountering downward pressure against the dollar, down to $1.1026 today.

image_2022_03_04T06_33_42_113Z

Figure 1 (Source: IS Prime) IDX.EU.50 : Russia on-going incursion into Ukraine see’s the STOXX 50 stumbling towards lows of March 2021.

 Headliner to Review

  • U.S. ISM Services PMI registered at 56.5% in February, down from 59.9% from the previous month. However, it is still growing as the economic activity in the services sector already grew by 21 months in a row. Labour shortage, supply chain disruptions and inflation are still the main issues faced by the respondents of the service sectors.
  • Unemployment rate in the euro area ticked down to 6.8% in January 2022, from 7% in December 2021. Likewise, unemployment claims in the U.S. fell to 215K, below economists’ forecasts as the ease of COVID-19 restrictions helped lead to a drop in jobless claims.

Headliner to Watch

  • German retail sales figure is due to release on Monday, expected to increase by 1.5%.
  • Unemployment rate in Switzerland will be announced on next week, previously it registered at 2.3%.

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Authors:
Antony Tan
Kerry Man