Market Commentary – May 24, 2022

Kevin Jock

24th May 2022

U.S. stock markets opened the week higher on Monday while government bond prices fell, as investors returned to riskier assets as well as comments from President Biden, that he may consider cutting tariffs on Chinese goods. The blue-chip S&P 500 advanced 1.9% with gains in almost every sector, while both the Dow and the Nasdaq closed higher by 1.98% and 1.59% respectively. Financial firms are simply leading the gains in the S&P 500, boosted from JP Morgan as their stock price rose 6.19% after CEO Jamie Dimon commented that the bank is on track to meet its 2022 goals.

In Europe, local shares also ended higher on Monday, driven by an unexpected increase of German business confidence in May, which offered some hopes that the Europe’s largest economy is resilient in facing multiple headwinds ranges from high inflation to supply-chain problems. Both London’s FTSE 100 and France’s CAC 40 indices hiked 1.67% and 1.17% respectively. Meanwhile, Ukraine’s president Zelensky asked the international community to rebuild the country after the war and use frozen Russian assets to compensate victims during the Davos World Economic Forum on Monday.

The performance of the Asian markets on this morning seems deviated away from the overnight U.S. markets, as majority of the local stock indices are down, including the Nikkei 225 which has declined 0.51% before the mid-day trading break. HK’s Hang Seng index dropped for the second day in a row, by 1.51%. On the other hand, Joe Biden made his remarks that the U.S. will use military force to defend Taiwan should China invades them during his first visit to Japan yesterday. Obviously, such expression encountered firm opposition from the Chinese government which was addressed by the respective foreign ministry spokesperson.

Oil price eased in early trade on Tuesday as weaker consumption outweighed expectation of tight global supply, with brent crude stays almost flat at $113 per barrel. The euro rose 1.2% against the dollar to just under $1.07 yesterday, as the ECB president Lagarde signaled the end of negative interest rates in the eurozone within months. On the other hand, BNP Paribas joined the blockchain network run by JP Morgan for short-term trading in fixed income markets. This arrangement is the first step of using digital tokens to facilitate the links in global financial system.


Figure 1 (Source: IS Prime) EUR/TRY daily: Turkish lira resumes weakening as the currency has comes under pressure due to the widening current-account deficit, compounded with soaring inflation which dented investor confidence.

Headliner to Review

  • The German ifo Business Climate index has increased for the second month in a row to 93 in May, from 91.9 in April. Such higher-than-expected reading is driven by an improved current assessment on post-lockdown however, cautiousness must be taken into consideration as businesses still faces high level of uncertainties.

Headliner to Watch

  • New Zealand will deliver its official cash rate announcement on Wednesday, it is widely expected that they will raise the rates by 50bps to 2% as it would be the first central bank to get back to the neutral stance.
  • The latest quarterly GDP figure is also due to release in Germany, forecast to increase marginally by 0.2%, which is equivalent to the figure from the previous quarter.

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Antony Tan
Kerry Man