Market Commentary – March 25, 2022

Kevin Jock

25th March 2022

Wall Street equity markets bounced back from Wednesday’s sell-off as U.S. president Joe Biden met NATO and G7 leaders to discuss about potential further sanctions against Russia. Both the Dow and the S&P 500 indices ascended over 1%, while the Nasdaq rose almost 2%. Such advance in the stock markets is also partially contributed to the fact that the traders have switched bonds into equities as the current global bond market is undergoing its deepest downturn since 1990.

The European markets remain nearly flat on Thursday, with only the French CAC 40 index dipped marginally by 0.4%. During the NATO summit, Biden urged its allies to remain unified and continue to pressurize Putin as the war goes on. They will respond punitively should Russia dare to use chemical weapons during its invasion. Meanwhile, the U.S. officials are discussing about the freeze of Russian gold reserves that is worth up to $132bn. The Russian equity market restored trading partially, limited to long positions only and not short selling.

Across Asia, both the Australian and Japanese stock indices rose slightly on Friday, to close up 0.26% and 0.14% respectively. Whereas both the Chinese and the HK markets decline quite significantly, especially during the afternoon trading session in which the indices prices fell rapidly. The Hang Seng Index closed down by nearly 2.5%, dragged by the tech sub-sector in which the tech indices dipped almost 5%.

Oil price declined overnight with the price of WTI crude currently trades at around $111.4 per barrel. The EU’s refusal to sanction Russian oil is the primary reason of such decline. Gold price edged up a bit as it becomes an inflation hedge once again, settled at $1,957.58 per ounce last night. The yen was headed for its worst week in two years as it dropped to a multi-year low at 121.50 against the dollar, after the BoJ Governor Kuroda announced his view that a weak yen benefits the economy as a whole.

Bitcoin chart (2022.3.25)

Figure 1 (Source: IS Prime) BTC/USD daily: Bitcoin has made a comeback in the recent weeks as it gained 8.2% over the week, now aims to reach $45K.

 Headliner to Review

  • The U.S. Flash Manufacturing PMI registered 58.5 in March, higher than the expected figure of 56.6. This indicates the fastest rise in private sector output since July 2021, supported by suppressed demand and the ease of the COVID related restrictions.
  • In Germany, their Flash PMI Composite Output index dropped to 54.6 in March from February’s six-month high of 55.6. Such decline is attributed to a combination of factors including staff absences linked to COVID, as well as weaker demand caused by the war in Ukraine.

Headliner to Watch

  • The preliminary wholesale inventories figure is due to release in the U.S. on next Monday, in the previous month it ticked up slightly by 0.8%.

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Authors:
Antony Tan
Kerry Man