Market Commentary – March 09, 2022

Kevin Jock

9th March 2022

Wall Street stocks experienced a roller-coaster ride as of yesterday. All the major indices were up during the first half of the trading session and then the trend reversed dramatically which resulted in all of them closing in red territories. Such a fierce reversal is due to the announcement of the U.S. banning imports of Russian oil and gas, while the UK followed the action shortly afterwards, deciding to phase out oil imports over the year. The EU has also formulated a similar plan to cut gas imports by two-thirds within a year.

European equities slipped marginally on Tuesday, with both London’s FTSE and the German DAX remain flat towards the end of the trading session. While the war in Eastern Europe continues, the corporate boycott on the Russian economy intensified as well, with world-wide consumer brands including Coca-Cola, Starbucks and McDonalds all announcing to either halt, or cut back operations in Russia.

In East Asia, Australia’s benchmark index ASX 200 has finally closed up by 1.04%, after three days of consecutive decline. China’s blue-chip CSI 300 index made a large comeback in today’s late afternoon trading session, as it has dipped over 4% then retraced its losses to finally close down by 0.92%. Likewise, HK’s Hang Seng Index was in a similar shape as it has dropped as low as 20,102.57 points and regained some losses in the afternoon to close marginally lower.

In the commodity markets, brent crude once again hiked above $130 per barrel as Russian oil struggles to find buyers after U.S. stepped up related sanctions, once again causing supply-side shocks. Gold price surged above $2,000 per ounce as the geo-political conflicts made investors seek the safe-haven yellow metal. On the other hand, the price of Nickel contracts traded in the London Metal Exchange (LME) has surprisingly jumped above $100K a ton, prompting the exchange to suspend trading as the situation in Eastern Europe continues to shake up the commodity markets.

SP 500 chart (2022.3.9)

Figure 1 (Source: IS Prime) S&P 500 daily: The U.S. blue-chip S&P 500 index has been falling in recent weeks as investors piling into the haven assets and avoid high-risk equities. The index has now dropped to its lowest level since June 2021. 

 Headliner to Review

  • In the fourth quarter of 2021, both the EU revised GDP and the final employment change statistics increased 0.3% and 0.5% respectively, which are in line with the forecasted figures.
  • Retail sales figure in Italy dropped by 0.5% in January 2022, lower than the expected figure of an increase of 1.1%.

Headliner to Watch

  • The ECB will announce its monetary policy statement tomorrow. We expect them to strike a cautious balance and maintain high flexibility in terms of policy normalization, amid the heightened uncertainty. It is unlikely that they will signal a specific end date on asset purchases and should adopt a more gradual approach to tapering.

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Authors:
Antony Tan
Kerry Man