Market Commentary - May 05, 2022

Wall street equities ended significantly higher on Wednesday after the Fed delivered first half-point interest rate rise since 2000, which is wildly expected by the market participants. All three major U.S. indices were down during the first half of the trading session, it then rocketed to close the day up by 3% after the Fed interest rate announcement, in which Powell ruled out the possibilities of a more aggressive 0.75% increase which is a significant boost to investor sentiments. U.S. two-year treasury yield dropped 0.13% after the Fed press conference to 2.64%.

Across the Atlantic, European stocks fell yesterday due to disappointed earnings, especially the retailers such as UK’s online fashion retailer Boohoo, in which their share price slammed by 12.27% due to high logistics costs triggered by inflation. All the primary European stock indices are down including FTSE 100 and CAC 40, as they dropped 0.9% and 1.24% respectively. Meanwhile, Hungary said it would reject EU’s proposal of banning Russian oil imports unless an exception can be agreed to allow them to import Russian crude via pipelines.

In Asia, Australian shares tracked Wall Street gains on Thursday, the benchmark index ASX 200 ended the day higher by 0.82%. China’s benchmark CSI 300 index remain literally unchanged before the market close, as the mainland markets resumed trade today after a three-day holiday, while HK’s Hang Seng Index advanced marginally by 0.44%. On the other hand, Tesla has confirmed that it intends to build a second plant in Shanghai, looking to push up the annual capacity over 1M vehicles.

In terms of commodities, OPEC+ said they will likely stick to modest oil output increase and argued that they are not responsible for geopolitics and supply disruptions, which pushed the price of brent crude to as high as $111 per barrel. Gold price jumped over 1% to $1,903.32 on Powell’s statement, while bitcoin reached $40K on Wednesday, from the year’s low of $32.9K since 24th January.

EURCAD charts (2022.5.5)

Figure 1 (Source: IS Prime) EUR/CAD daily: A stark contrast between the hawkish BoC and the dovish ECB has driven the currency pair lower during the first quarter of 2022, with the Canadian dollar being the standout performers while the euro were among the worst performers.


Headliner to Review

  • Unemployment rate in New Zealand remained at 3.2% throughout the first quarter of 2022, which is in line with economists’ expectations. However, annual wage inflation accelerated to 3.1% which prompt investors to think the local central bank could accelerate the pace of monetary tightening.
  • U.S. private sector employment increased by 247K jobs in April according to the newest ADP figures. However, such increase is much lower than the forecasted figure of 382K as the economy approaches full employment, labour shortages caused job gains to soften while hiring demand still remains strong.
  • The U.S. ISM Services PMI printed 57.1% in April, still growing but the rate has decelerated due to the restricted labour pool, as well as the slowing of new orders growth.

Headliner to Watch

  • U.S. Nonfarm payrolls are expected to grow by a solid 390K in April, with unemployment rate predicted to tick down further by 0.1% to 3.5%.
  • The Canadian unemployment rate is also expected to announce on this Friday, forecast to further reduce by 0.1% as well, to reach 5.2% in April.

Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice.

Authors:
Antony Tan
Kerry Man