Market Commentary – September 08, 2022

Kevin Jock

8th September 2022

U.S equities reversed its recent declines on Wednesday followed a drop of the 10-year Treasury note. Both the Dow and the S&P 500 indices climbed 1.4% and 1.83% respectively. While the Nasdaq led gains among the main indices to hike over 2%. Fed chair Powell will make his speech tonight since the Jackson Hole event and we will see his stance of the monetary policies.

European shares ended Wednesday pretty much flat, with the broad benchmark STOXX 50 rose by less than 0.1%. However, export figures from China hindered market sentiment as it seems to be a sign of slowing global growth. On the other hand, all eyes are now on tonight’s ECB’s rate decisions as it is now the question of how much they are going to raise interest rates.

Across the Asia Pacific, the performance of the regional major indices is mixed, as both the ASX 200 and Nikkei 225 indices advanced 1.6% and 2% respectively after the mid-day session break, while HK’s Hang Seng index dipped marginally by 0.39%, looking to reclaim the key level of 19,000 points.

In terms of commodities, price of Brent crude settled sharply lower on Wednesday, reaching a low since January 2022 below the $90 level as lackluster Chinese trade data worried investors of a potential recession. Gold prices remain steady above the critical level of $1,700, however, it is still vulnerable to another massive selloff. Meanwhile, major Asian currencies depreciated significantly against the dollar in the recent days, with both the CNH and Japanese Yen making new lows against it.

USDCNH Daily (2022.9.8)

Figure 1 (Source: IS Prime) USD/CNH daily: The Chinese Yuan dropped to two-year lows recently against the dollar, as a result of broader dollar strength in global markets. However, the Chinese central bank has tried to slow the Yuan’s depreciation through the cutting of FX reserve ratios.

Headliner to Review

  • The Australian economy rose 0.9% in the second quarter, in line with the forecasted figure.
  • The Bank of Canada (BOC) delivered a fourth consecutive interest rate hike on Wednesday, from 2.5% to 3.25%, trying to alleviate inflationary pressures from four-decade highs.

Headliner to Watch

  • The ECB will hold its press conference tonight, looking to raise interest rates again of either 50 or 75 basis point.
  • Unemployment rate in Canada is due to release tomorrow, expected to go up slightly from 4.9% to 5%.

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Kerry Man