Market Commentary - May 09, 2022

The U.S. stock markets extended Thursday’s massive decline to continue to drop and finished the session lower on Friday. All major indices ended the day lower with both the S&P 500 and Nasdaq indices fell 0.57% and 1.4% respectively, which also brought both indices fifth straight week of declines, the worst streak since June 2011 for S&P 500 and November 2012 for the Nasdaq. Investors are currently feeling disoriented after the Fed’s decision of raising interest rates and seems equities are encountering more headwinds as heightened market volatility in general.

European equities did not fare better on last Friday either, with majority of the stock indices fell broadly which has resulted their worst week in two months. STOXX 50 indices dipped 1.82% with both the retailers and the tech stocks among the worst performers on the prospect of larger interest rate hikes with ECB expected to raise rates later this year. In terms of the conflicts in Ukraine, the commanders of the Ukrainian forces resisting Russian siege in the steel factory of Mariupol displayed dissent on the local government, condemning them of ignoring the harsh realities of local causalities while exaggerating the success of small evacuation of small groups of civilians. Such comments were the first public display of protests within the Ukrainian military.

In Asia, local markets seem to pick up the decline of Wall Street stocks from last Friday, as both the Australia’s ASX 200 and Japan’s Nikkei 225 indices slide 1.14% and 2.27% at the mid-day break. BoJ (Bank of Japan) remained determined to keep the massive monetary stimulus based on their March policy meeting showed today. Meanwhile, HK’s stock market is closed due to the local public holiday, while John Lee being announced as the next chief executive.

Both the Brent and WTI crude rose for the second straight week on EU’s decision of a phased embargo on Russian oil, while some countries veto against it and asking for exemptions. Oil prices remain pretty much flat today. Gold price dropped slightly to currently trade at $1,872.51 per ounce, while the Chinese Yuan continue to depreciate against the dollar to the level of 6.75896 as of today.

AUDUSD charts (2022.5.9) - Updated

Figure 1 (Source: IS Prime) AUD/USD daily: Aussie dollar has been dropping consecutively last week, as the rally faded away completely after the cash rate increase, currently looking to test the support at the 0.7 psychological level.

 

Headliner to Review

  • The U.S. economy added 428K jobs in April, according to the NFP report released on last Friday. Unemployment rate stayed at 3.6% which is equivalent to the figures from the previous month, while the average hourly earnings were up only 0.3%, fell short of the forecasted figure of 0.4%. Such slower growth of the earnings could possibly indicates that the labour markets are cooler than previously thought, which reduce the underlying pressure on inflation.
  • Unemployment rate in Canada has dropped to a new low of 5.2% as compared to 5.3% from the previous month, with employers added 15.3K positions in April.

Headliner to Watch

  • The German ZEW Economic Sentiment index is due to release on Tuesday, with the forecasted figure continue to remain downbeat at -43 as the war in Ukraine looms on the economy.
  • Year-on-year household spending is expected to continually decline in Japan, forecasted to further contract by 3.2%.

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Authors:
Antony Tan
Kerry Man