Market Commentary – March 15, 2022

Kevin Jock

15th March 2022

The performance of the Wall Street stocks turns out to be volatile as of yesterday’s market close. Both the S&P 500 and the Dow were rising during the first half of the trading session but soon afterwards their gains were erased and end up in losses and flat respectively. The prospect of rising interest rates weighed on U.S. stocks as the Fed is expected to announce rate decision on Thursday. This has particularly dampened the performance of the Nasdaq as it has fell by over 2%. Chinese tech stocks listed in the Nasdaq suffered the most, with both Alibaba and JD.com plummet by 10%. Subsequently on the political front, the U.S. told allies that China is willing to provide military assistance after Russia requested equipment including variety of missiles to support its invasion, but both countries denied such comments.

European equities generally gained on Monday, on hopes of diplomatic efforts by Ukraine and Russia to ease the conditions of the conflicts. The broad benchmark EURO STOXX 50 rose 1.47%, while Germany’s DAX jumped 2.21% with the car maker Volkswagen’s share increased 4.38% after the company doubled its operating profit. On the other hand, the fourth round of talks between Ukraine and Russia is about to get underway.

In Asia, local stock markets are down on Tuesday morning with the exception of Japan’s Nikkei 225 as it has rose marginally by 0.25%. All eyes are now on China as the surging COVID-19 cases hit the confidence of investors, which led to big drop of the Shanghai Composite Index to as low as over 2%. Apparently, the country is facing the worst outbreak in two years with the city of Shenzhen under lockdown since Sunday, with 17M residents which is by far the biggest cities under lockdown. Total number of cases surged past 3,400 nationwide and China’s “Zero-COVID” approach is now put under test.

In terms of the commodities, WTI crude dropped below $100 a barrel for the first time since 1st March, currently trading at around $99.90. Bullion has fell sharply as well, after bond yields climbed ahead of the key Fed meeting where policy makers are looking to raise rates. The Chinese Yuan has depreciated significantly against the dollar to trade at 6.38670 per dollar, on the back of Fed rate decision as well as the outbreak of the virus cases in Mainland China.

USDCHF Chart (2022.3.15)

Figure 1 (Source: IS Prime) USD/CHF daily: The currency pair has made a 11-month high at 0.9390 due to the risk-aversion theme in the market, especially under the current situation ahead of the Fed’s interest rate decision which has underpinned the greenback against the Swiss franc.

 Headliner to Review

  • The EU has decided to impose new sanctions on the Russian oil & gas giants, including Rosneft and Gazprom Neft, potentially blocking investments in fossil fuels during yesterday’s Eurogroup meetings.

Headliner to Watch

  • U.S. retail sales report in February is due to release on Wednesday, which is expected to show a dramatic decline in sales growth, from 3.8% increase in January to only 0.4% gain last month.
  • CPI figure in Canada is forecasted to increase by 0.9%, in line with the statistics from the previous month.

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Authors:
Antony Tan
Kerry Man