Market Commentary – March 14, 2022

Kevin Jock

14th March 2022

U.S. markets fell for a second straight day on last Friday and registered their worst week in nearly two months, as the conflicts in Ukraine continued to weigh on investors’ sentiment. The S&P 500 index dropped 1.3% and such decline took the index’s weekly loss to 2.9%. The Nasdaq dipped 2.18% on the day and took its fall for the week to 3.5%. U.S. President Biden announced on Friday that he will revoke Russia’s “most favored nation” status, such move will lead to higher tariffs on many Russian exports in order to further punish their economy. Soon after that, the other G7 countries followed on to end normal trade relations with Russia.

Performance of the European equity market is dramatically different compared to the U.S. counterpart, with all the major local stock indices closed high on last Friday. In fact, the European shares made their biggest weekly gain this year after the Russian President Putin hinted about the positivity of talks with Ukraine, which has helped to lift market sentiment on that day. However, such positivity might not last long for the markets as the Russian troops expanded their range of offence by assaulting the Yavoriv International Centre for Peacekeeping and Security during the weekend. The Yavoriv centre situated in Western Ukraine, close to the border of Poland and the sensitivity of this location indicates that the NATO members could also be harmed under such attack.

In Asia, performance of the major stock indices across the local markets are mixed, with both the ASX 200 and Nikkei 225 indices rose by nearly 1% after market open. In contrast, HK’s Hang Seng Index continue to slide as it has broken through the key level of 20,000 points, first time since June 2016. Such decline is once again dragged by the tech heavyweights including Tencent and Alibaba, due to the negative news announced by SEC as the U.S. regulator sets clock to delist Chinese companies over U.S. audit demand.

Price of Brent Crude continue to drop on Monday morning, following last week’s decline, currently trading at $110 per barrel as the U.S. official said Russia has the tendency to have a substantive negotiation over Ukraine. Gold price has also dropped and remain volatile while the geo-political conflict continues, it opened high on today at $1,989.7, then subsequently dipped to $1,970 per ounce. Bitcoin price had similar trend as today’s gold price, opened high and then fell to $38K.

image_2022_03_14T03_52_10_084Z

Figure 1 (Source: IS Prime) USD/JPY daily : Divergence in monetary policy outlook between the Federal Reserve and BOJ has the greenback rally against the yen in anticipation of 2022 rate hikes in the U.S.

 Headliner to Review

  • In Canada, the newest employment report in February showed jobs increase of 336.6K, much higher than the anticipated figure of an increase of 132K. Such massive gains are led by private sector, while self-employment continues to be flat. Unemployment rate also dropped to 5.5% compared to 6.2% from the previous month.
  • The U.S. Preliminary UoM Consumer Sentiment Index came out to be 59.7, a lot lower when compared to the last month, which is at 62.8. As inflation expectations surged due to the ongoing wars, such sentiment could possibly slump further.

Headliner to Watch

  • February’s PPI figure will be released in the U.S. on Tuesday, the consensus estimate is for a 1% monthly rise. We will see if such prices also jump up for producers like they did for consumers.
  • The Euro Zone ZEW Economic Sentiment index is expected to decline sharply to 10.3 points only, compared to 48.6 points in February.

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Authors:
Antony Tan
Kerry Man