Market Commentary – March 21, 2022

Kevin Jock

21st March 2022

The U.S. equity markets advanced on last Friday with the S&P 500 gained 1.2%, while the Nasdaq index hiked 2.05% with both indices now rallied four days in a row. Levels of fear in the market seemed to gradually return to normal as investors are no longer hedging themselves excessively against potential whipsaws, with the Vix index dropping four days in a row to 23.87 points. Chinese President Xi Jinping had a video call with Biden on Friday, both of them exchanged views on the situation in Ukraine as well as US-China relations. Biden reassured that the U.S. is not seeking to fight a new “cold-war” against China.

European stocks made a come back on Friday, adding to the strong gains earlier last week with the EURO STOXX 50 index rose 0.44%. The benchmark index had its best weekly performance since November 2020 on optimism that a peace treaty could be accomplished among the Ukraine conflicts that has shaken the global markets. Meanwhile, Ukraine and Russia will start a new round of negotiations on Monday via video conference, with the Ukraine President Zelenskyy emphasizing that some of the compromises are unacceptable, including the acknowledgement on the independence of both the Luhansk and Donetsk regions. On the other hand, France has announced to freeze 22bn euros in the assets of the Russian central bank.

Share markets in Asia remain calm as of Monday morning, with the Australia’s ASX 200 indices remain nearly flat, while the Japanese market is closed due to the local national holiday. In mainland China, the PBoC has kept its benchmark interest rate unchanged on Monday, which is expected by the market consensus. Elsewhere in Hong Kong, the financial secretary has reaffirmed that the local HK stocks do not entail systematic risks. The blue-chip Hang Seng Index is up marginally by 0.3% at 21,475 points before the mid-day break.

Price of Brent Crude climbed over $2 on Monday morning, trading at around $111.62 per barrel as oil prices continue to advance. There are little signs of the easing of the conflict as the market worried whether it would be possible to replace Russian barrels hit by sanctions. Price of bullion remains steady after its biggest weekly decline since June 2021, trading at $1,925.70 per ounce. The U.S. dollar index bounced back on Friday from the recent drop to 98.31, after the statements from the Fed officials with a slightly more hawkish tone.

image_2022_03_21T03_54_04_030Z

Figure 1 (Source: IS Prime) IDX.US.100 daily : Potential de-escalation as Biden and Xi talks sees tech rebound viciously to close above 14,000 points.

 Headliner to Review

  • As expected, the Bank of Japan (BoJ) left interest rates unchanged at -0.1% and will also continue with its monetary stimulus. In contrast, both the Fed and Bank of England have already rose rates while BoJ’s action deviates away from the other major central banks. Furthermore, BoJ governor Kuroda mentioned in the press conference that the biggest impact on Japan’s economy comes from the Ukraine crisis through rising raw material costs.
  • The U.S. Existing Home Sales figure came out to be 6.02M units in February in terms of annual rate, lower than the forecasted figures as mortgage rates rose, and supply remained tight.

Headliner to Watch

  • The U.S. Richmond Manufacturing Index is expected to increase to 2 from 1 in the previous month.

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Authors:
Antony Tan
Kerry Man