Market Commentary - May 10, 2022

U.S. stocks on Monday was pummeled once again on concerns relating to the increase of interest rates, with global investors now worrying about signs of economic slowdowns as Chinese export growth have fallen to the lowest level in two years last month. Both the S&P 500 and Nasdaq indices dropped sharply by 3.2% and 4.3% respectively. Boeing is the worst performing stock as it plummets by 10.47% yesterday, on questions regarding the future of the plane maker’s 777X jet.

European equities hit two-month lows on Monday, with all the major stock indices down by over 2% as surging bond yields and COVID-19 lockdown in China continue to weigh on investors’ sentiment. Tech stocks continue to underperform as it dipped 5% to November 2020 lows due to their sensitivity on bond yields. Russia has celebrated its annual Victory Day parade in Moscow as of yesterday, with the president Putin justified the reasons of their invasion of Ukraine in which the Ukrainian president rebuked his claims.

Asian markets on Tuesday also encountered quite heavy sell-off after the steepest one-day decline on Wall Street the night before, with Japan’s Nikkei 225 dipped to as low as 25,769 points for the first time since mid-March. HK’s Hang Seng Index slid 1.75% in afternoon trading after coming back from the holiday yesterday, as their tech stocks hit the hardest especially Alibaba, which it dropped as much as 7%.

Price of Brent crude dropped on Tuesday morning by as much as 1% to extend previous day’s losses, however, it has since recovered the early morning declines to trade at $106.50. Yellow metal prices are up slightly on Tuesday over the weakening dollar. Surprisingly, bitcoin fell significantly to below $30K for the first time since July 2021 as investors reducing their exposures on riskier assets.

Nasdaq charts (2022.5.10)

Figure 1 (Source: IS Prime) Nasdaq daily: The Nasdaq indices have been hit hard in the recent weeks as tech stocks are particularly sensitive to rising U.S. bond yields, with Wall Street banks believing that the U.S. stocks may continue to decline under such inflationary environment. 

Headliner to Review

  • Exports in China only grew by 3.9% in April compared with a year earlier, down from 14.7% growth in March, while imports remained almost flat. Strict Zero-Covid control is the major factor dragging the export figures down and a potential recovery in the near future could still face multiple headwinds including global inflation and geopolitical tensions.

Headliner to Watch

  • The U.S. CPI figure from April is due to announce on Wednesday, with economists expecting the inflation to soften to 8.1% annually, down from a 40-year high of 8.5% in March.
  • Both the Chinese CPI and PPI figures are due to report tomorrow, with the CPI expected to edge up to 1.9% from 1.5% in March, while PPI is forecasted to fall for the sixth consecutive month to 7.8%.

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Authors:
Antony Tan
Kerry Man