Market Commentary – March 18, 2022

Kevin Jock

18th March 2022

Wall Street stocks rose again on Thursday, with both the S&P 500 and Nasdaq indices gaining 1.23% and 1.33% respectively, three days of continuous advance in a row. Such moves came after the BoE increased borrowing costs by mirroring the Fed’s decision a day earlier. Share prices of travel-related companies are down due to higher oil prices including Carnival and Booking Holdings. Biden will speak to the Chinese president Xi Jinping on Friday, about the conflicts in Ukraine on concerns that Washington believe China could possibly aid Putin’s war.

European equities turn out to be mixed with London’s FTSE 100 rose 1.28% at the market close, while Germany’s DAX dropped 0.36%. All eyes are now on the progress of the Ukraine peace talks, although the advisor of the Ukrainian president mentioned that it could take few days or two weeks to accomplish a peace accord. On the other hand, Zelensky spoke with anger to the German officials yesterday, condemning them over placing economic relations with Putin over the security of Europe.

Elsewhere in Asia, local stock markets seem to have calmed down from the manic rallies during the last two days. Japan’s Nikkei 225 rose marginally by 0.27% before the mid-day break. Surprisingly, even Japan is now having inflationary pressures due to the spike of wholesale prices, as the economy has been under deflationary pressures in the past decades. Mainland Chinese stock market dipped during the mid-day with the blue-chip CSI 300 index down by 0.89%. City of Shenzhen will be partially open from the lockdown in this weekend.

Oil price goes up again on Friday’s trading session, with WTI crude currently trades above $106.5 per barrel. There are still a lot of uncertainties among the ceasefire talks and the possibilities of tighter sanctions and continued disruption to oil supply still exists. The price of gold dropped slightly today, currently at the level of $1,934.25 per ounce, while EUR/USD remains flattened today at $1.1085.

AUDJPY chart (2022.3.18)

Figure 1 (Source: IS Prime) AUD/JPY daily: The Australian dollar has been rallying extensively against the Yen in this week, reaching as high as 88.057 in today’s trading session. The strong jobs report has further boosted the AUD.

 Headliner to Review

  • Australia’s job market has continued to strengthen, with 77.4K extra people getting employed in February, much higher than the forecast of 36K people. The level of unemployment rate dropped to 4%, the lowest level it has been since the labour force survey started in 1978.
  • The Bank of England (BoE) hiked the interest rate by 25bp to 0.75% yesterday, which is widely expected by the market consensus as the war in Ukraine added inflationary pressures to the country. The bank predicted inflation could go up to 8% in Q2 of 2022 with the MPC mentioning that some further modest tightening in monetary policy may be appropriate in near future.

Headliner to Watch

  • German PPI data is due to release on next Monday, expected to further increase by 1.7% according to the market consensus.

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Authors:
Antony Tan
Kerry Man