Market Commentary - August 08, 2022

The U.S. equity markets ended slightly lower on Friday, as both the S&P 500 and Nasdaq Indices dipped 0.16% and 0.5% respectively, weighed down by Tesla and a much stronger than expected jobs report which could possibly induce the Fed to tighten the rates further.

Across the Atlantic, European shares also slid on Friday, affected by the U.S. NFP reports, with the broad benchmark STOXX 50 lost 0.78%. On the other hand, the ECB injected €17bn into Italian, Spanish and Greek markets between June and July, in an attempt to curb the borrowing costs of these countries and to prevent a eurozone debt meltdown.

In Asia, the performance of local markets is pretty much flat following Monday market open, though HK’s Hang Seng Index decline 0.77%. Meanwhile, Hong Kong eased its tough pandemic border control measures on Monday, to shorten the hotel quarantine period from seven days to three days of isolation, followed by four days of home medical surveillance.

In terms of oil, it has dropped to multi-month lows amid recession fears, with price of Brent crude currently trading below $90 per barrel. In addition, the price of yellow metal also dipped on Monday as gold is currently at $1,774.86 per ounce, while bitcoin price continues its range-bound at $22.98K.

USDCAD chart (2022.8.8)

Figure 1 (Source: IS Prime) USD/CAD daily: The currency pair rallied to a fresh high of 1.29847 following the announcement of larger than expected NFP figures. Nevertheless, the U.S. dollar may continue to outperform as the upbeat jobs report raises the chances of another 75bp rate hike by the Fed.

Headliner to Review

  • The newly released NFP figures in July showed that the U.S. added 528K jobs, much higher than the expectations of 250K jobs. Likewise, unemployment rate also dropped to 3.5% and altogether, such strong labour market could entice the Fed to hike rates further in a more aggressive manner.
  • Employment in Canada dropped by 31K in July, with Ontario contributed towards the majority of such decline as the province saw a 27K decline in employment.

Headliner to Watch

  • Westpac consumer sentiment index is due to release in Australia, previously it has dipped by 3%.

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Authors:
Antony Tan
Kerry Man