Market Commentary – October 03, 2022

Kevin Jock

3rd October 2022

U.S. equities declined on the last trading day of September to end up in their longest streak of quarterly losses since the financial crisis back in 2008, mainly due to the central bank’s determination to curb inflation through higher interest rates. For the month of September, the Dow dropped 8.8%, the S&P fell 9.3% and the Nasdaq was 10.5% lower.

Across the Atlantic, European shares climbed on Friday but endured significant losses during a quarter as the high interest rate environment dented the attractiveness of risky assets, along with hot inflation data from the region impacted investor’s confidence. On the other hand, the Ukrainian armies made further progress on the battlefield over the weekend by retaken the city of Lyman from the Russian forces.

In Asia, Japan’s Nikkei 225 index rose on Monday, boosted by both chip and energy shares. While HK’s Hang Seng index dipped below 17,000 points in the morning but recovered partially to linger slightly above the key level. The Chinese markets are closed today due to the local public holiday.

The U.S. WTI crude oil jumped marginally on Monday, as OPEC+ considers a cut to output this week, currently at $88.024 per barrel. Gold price steadied today as the risks of an economic recession made the yellow metal more attractive to investors, while the reversal rally for EURUSD seems to be stalled, trading at $0.97910 as of now.

USDTRY chart (2022.10.3)

Figure 1 (Source: IS Prime) USDTRY daily: Turkish lira continue to depreciate against the dollar after its central bank delivered another surprise 100bps rate cut on late September, sending the currency to an all-time low of around 18.56.

Headliner to Review

  • The U.S. August Core PCE price index rose 0.6% month-to-month, above the expected figure of 0.5%. Such indicator is Fed’s favored measure of inflation, and this higher-than-expected result might keep reinforce expectations of a fourth consecutive 75bps rate hike in November.
  • The revised UoM consumer sentiment index came out to be 58.6, fell short of the forecasted figure of 59.5.

Headliner to Watch

  • The Reserve Bank of Australia (RBA) is looking to deliver another 0.5% rate hike on tomorrow, to bring the cash rate from 2.35% to 2.85%.
  • On Tuesday, The U.S. Labor Department will print the figures of the JOLTS report for August, the figure is looking to tick up slightly to 11.35M.

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Kerry Man