Market Commentary – May 03, 2022

Kevin Jock

3rd May 2022

The U.S. equity markets opened the month with a rather volatile session yesterday as it dipped significantly in the first half of the trading session and then recovered the losses to closed up in green territories. All three major stock indices were up especially the Nasdaq indices since it managed to finish the session up by 1.61% as traders took advantage of the recent slides to buy the dip. However, the yield of the 10-year U.S. Treasury note touched 3% since 2018 on Monday, as investors waits for the Fed’s rate decision later on this week with the markets pricing in a 99% chance of a 50-bps increase of rates. Apple is potentially facing a hefty fine from the EU as the local regulators charges the company over the abuse of dominance on Apple Pay.

The European markets are generally down on Monday with the broad benchmark indices STOXX 50 declined 1.85%. Shortly after the market opened, all the major European stock indices encountered a sudden sharp drop which was later confirmed to be a flash crash of the Nordic markets driven by a single erroneous sell order made by Citi’s London Trading Desk. The Stockholm OMX 30 index suffered the hardest hit as it fell by 8% at one point before parred back some of its losses. Meanwhile, Germany has called for a stepwise ban on Russian oil imports into the EU, which has puts pressure on Brussels to reach a deal between the member states since not everyone strongly agrees with such enforcement including Hungary, as 65% of its oil come from Russia.

Performance of the Asian markets are mixed on Tuesday. The Australian shares are flat as investors remain cautious ahead of the RBA’s meeting, with the ASX 200 down marginally by 0.18%. HK’s Hang Seng Index encountered a strong sell-off soon after the market opening, with the stock price of Alibaba down by as much as over 9%. However, such massive decline is mostly recovered with the indices currently down by only 0.1%. Meanwhile, Beijing has tightened the Covid-related curbs after more cases being reported, officials now have shut down gyms and cinemas and raised Covid-19 testing requirements as they are trying to avoid the chaotic situation in Shanghai.

Crude oil climbed for a fifth month in April, the longest monthly winning streak since January 2018 as WTI crude currently held above $105 a barrel. Bitcoin price continued to slide due to the news of the Fed hiking its interest rates, currently trading marginally above $38K and looking to test the support level of $38K. U.S. dollar is approaching 20-year highs against a basket of currencies before the Fed announcement, with the dollar index currently at 103.53 after reaching 103.93 on last Thursday, the highest since Dec 2002.

XAUUSD charts (2022.5.3)

Figure 1 (Source: IS Prime) Gold daily: Price of yellow metal has tumbled recently as it has dipped through the $1,900 support level, with its key rival, the greenback soared on the back of U.S. rate hikes. It has now fallen to a 10-week low to trade at $1,864 per ounce.

Headliner to Review

  • The Japanese Consumer Confidence Index printed at 33, slightly lower than the forecasted figure of 34.9 and higher than 32.8 from the previous month.
  • U.S. April 2022 Manufacturing PMI figure registered 55.4%, which indicates that the economy is still expanding, and it has achieved 23rd consecutive month of growth. However, such figure is the lowest since July 2020 with industries believing that supply chain and pricing issues are their biggest concerns.

Headliner to Watch

  • The New Zealand unemployment rate is due to report on Wednesday, with the market consensus believes that the rate could fall to a record low of 3.1% compared to 3.2% from the previous quarter.
  • The U.S. ADP National Employment Report is expected to print a gain of 400K positions in April, following a gain of 455K in March. Hiring in April is expected to remain strong despite a fall of Q1 2022 U.S. GDP data.

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Authors:
Antony Tan
Kerry Man