Market Commentary - August 05, 2022

The performance of Wall Street stocks is mixed on Thursday, with gains in high-growth stocks offset losses in energy shares. The S&P 500 dipped marginally by 0.1%, while the tech-heavy Nasdaq indices rose 0.41% as it has also hit a fresh three-month high led by Amazon.

European equities rose slightly yesterday, with some strong quarterly results underpinning the markets. London’s FTSE 100 index underperformed peers due to the lift of interest rates by the BoE. Likewise, the ECB has also hiked rates by 50 basis points last month and it is expected that they will continue to hike rates fairly aggressively over the coming quarters.

In Asia, local market performance fared well today as both the ASX 200 and Nikkei 225 indices rose 0.41% and 0.66% respectively, while HK’s Hang Seng Index remain nearly flat in the morning trading session. On the other hand, China’s joint military exercises continued around Taiwan as practically those drills are conducted in every single direction of the island.

In terms of commodities, oil prices continue to decline and hit their lowest level since before the war in Ukraine, as the markets are concerned about demand due to uncertain economic outlook. In contrast, bullion price extended gains on Friday and looking to end the week higher as such safe heaven assets usually benefiting from the uncertainties, with gold currently trading at $1,791.53 per ounce. Meanwhile, EUR/USD advanced a head of tonight’s NFP report at $1.02353.

STOXX 50 chart (2022.8.5)

Figure 1 (Source: IS Prime) STOXX 50 daily: The broad European benchmark has recovered from the recent trough of 3,354.9 points in early July. However, inflationary pressure has not abated yet and could potentially cap the gains of the index.

Headliner to Review

  • Bank of England (BoE) raised interest rates by 0.5%, the largest hike in 27 years and warned that inflation will continue to tick up, causing UK into a recession by the end of the year.
  • UK construction PMI dropped significantly to 48.9 in July, such decline is the first time since January 2021 as both residential work and civil engineering encountered lower volumes.

Headliner to Watch

  • Unemployment rate in Switzerland is due to print next Monday, the rate remained steady at 2.2% in the previous few months.

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Authors:
Antony Tan
Kerry Man