Market Commentary – March 24, 2022

Kevin Jock

24th March 2022

U.S. equities dropped on a broad-based basis on Wednesday as it reversed some of its gains in the recent days. The Dow, S&P 500 and the Nasdaq indices all declined over 1%, with utilities and energy the only sub-sectors in positive territory. Investor confidence still remain quite fragile and many of them have chosen to cash in on their recent gains. Markets are now refocused on the potential effect of higher interest rates as well as the recent rallies of oil prices.

In Europe, local stock indices fell as the surge of oil prices made investors concern about the economic impact of the Ukraine crisis as well as the fact that the traders begin to book profits. The EURO STOXX 50 index dipped 1.45% last night with the banking sub-sector leading the losses. Both the CAC 40 and DAX indices dropped 1.17% and 1.31% respectively. On the other hand, the U.S. has formally announced that Russia has committed war crimes in Ukraine, point to the fact that their armies deliberately targeting local civilians during the invasion.

Across Asia, markets tracked Wall Street’s overnight performance and hence fell on Thursday. Australia’s ASX 200 indices dipped in the morning, but it then made a little comeback to trade at a near flat level. China’s markets opened lower, with HK’s Hang Seng Index down slightly, testing the level of 22,000 points. Share price of Tencent declined over 3% after it posted its slowest-ever sale increase.

Oil price rose above $120 a barrel during Thursday’s trading session, caused by a supply disruption in a pipeline delivering oil from Russia. Although such disruption is due to the abnormal storms, however, there could also be political problems which could potentially worsen the shutdown of the pipeline. Price of bullion increased yesterday to settle at $1,944.2 per ounce as market sentiment shift again to geopolitical tensions and rising inflation. Bitcoin price also hiked slightly to currently trade at $42.7K.

image_2022_03_24T05_36_30_797Z

Figure 1 (Source: IS Prime) USD/MXN daily : Mexican peso extends rally for 7th consecutive day towards the 20.00 handle in anticipation of another 50bp hike from the nations central bank

 Headliner to Review

  • UK’s CPI rose by 6.2% in the 12 months to February 2022, up from 5.5% in January as higher energy and commodity costs continuously to feed through to consumer prices.
  • The March EU consumer confidence index plummet from -9 points in February to -19 points as the war in Ukraine dragged consumer confidence down to well below its average.

Headliner to Watch

  • UK retail sales figure is expected to increase marginally by 0.6%, on a month-to-month basis.
  • In the U.S., the final reading of the UoM Consumer Sentiment Index will be released on Friday. In contrast, its preliminary reading earlier this month reached the lowest level in a decade due to the worries about rising inflation.

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Authors:
Antony Tan
Kerry Man