Market Commentary - October 7, 2021

Wall Street rebounded from an early morning sell-off on Wednesday as Republicans appeared to offer a path to end the US debt ceiling stand-off in Congress, which would stave off the immediate threat of a US default. The S&P 500 reversed its early losses of as much as 1.3%, closing up 0.41%, alongside Nasdaq climbing 0.47%.

In Europe, the region wide STOXX 50 failed to fully recovery initial losses driven by a 2% drop in the energy subsector. Russian President Putin garnered positive headlines but spooked commodity prices after remarking that Russia was prepared to supply more natural gas to Europe. Likewise, FTSE 100 slipped 1.15% largely resulting from the indices being sizably weighed by BP and Royal Dutch Shell, of which loss about 2.5% each.

Towards the east, Hong Kong rose on Thursday morning, on course for the biggest percentage gain in over 6 weeks, fueled by overnight optimism as well as major property developers leading gains after HK leader Carrie Lam unveiled new housing policy. The Hang Seng Index rose 2.41% by lunch break. Elsewhere, both Australia and Japan remained relatively mute.

On the oil front, the US energy secretary has raised prospect of releasing crude oil from the government’s petroleum reserve, as the Biden administration confronts a politically dangerous surge in the price of gasoline. Brent crude rose as high as $84 a barrel on Wednesday, declined 3.2% to $81.27. Meanwhile, the US dollar moved broadly higher with EUR crosses fairing lower across the board, largely attributed to the natural gas crunch raising concerns of economic erosion. Bitcoin extended its rally above the $55,000 resistance against the US Dollar, for the first time since May.

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Figure 1 (Source: IS Prime) EURUSD Daily : Uncertainty over economic growth and industry slowdowns risen from the prevailing energy has seen consistent outflows in the Euro.

Headliner to Review
  • The Reserve Bank of New Zealand (RBNZ) increased the official cash rate by 25 basis points to 0.5% during the announcement of their rate statement, which was widely expected. They also acknowledged that the current Covid restrictions have placed a strain on some businesses, but it won’t materially change the medium-term outlook for inflation and employment since the August review.
  • The US private sector employment increased by 568K jobs from August to September according to the newly released ADP National Employment Report, greater than the market consensus of an increase of 425K. Leisure and hospitality remains one of the biggest beneficiaries to the recovery yet hiring is still heavily impacted by the trajectory of the pandemic, especially for small firms.

Headliner to Watch

  • The US Non-Farm Payroll report is due to release in this Friday, with traders and economists anticipating a headline of about 490K net new jobs in September, more than double last month’s 235K print. The unemployment rate is expected to tick down to from 5.2% to 5.1%.

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Authors:
Antony Tan
Kerry Man