Market Commentary - October 13, 2021

On Wall Street, the S&P 500 index closed down 0.24% on Tuesday. The tech focused Nasdaq was down 0.14% with short-dated Treasury yields reaching their highest level since March 2020, as investors bet that inflationary pressures have pulled forward the date of the first US interest rate rise. Talks have now shifted from discerning whether price pressures is transitory to its persistence.

European shares slipped yesterday as investors feared soaring commodity prices would impede a recovery in corporate profit. The STOXX 600 index edged 0.1% lower, with fallout risk from China’s struggling property sector also remained after Evergrande missed its third round of bond payments in three weeks. Meanwhile, both CAC 40 and DAX fell 0.34% during the market close.

In Asia, the S&P200 held steady on Wednesday morning after two straight sessions of declines. Gains in gold stocks countered losses in heavyweight miners and financials. Elsewhere, the Japanese market remain nearly flat as investors nervously awaited US consumer price data due later in the day, with the Nikkei 225 dropped 0.22% in the morning close. HK stocks are closed due to the ongoing Typhoon Signal No.8.

Oil prices dropped on Wednesday, after a mixed finish in the previous session, amid worries that soaring coal and natural gas prices in China, India and Europe will stoke inflation and slow global growth, reducing oil demand. On the FX front, EURUSD fell to a new low for 2021 on Tuesday, pushing below 1.1529 and is down 5.6% since the start of January. In crypto, Bitcoin traded just above $56,000.

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Figure 1 (Source: IS Prime) IDX.HK.50 Daily : The embattled Hong Kong index following a regulatory rout initiated by Beijing has since gradually rebounded from the years low.

Headliner to Review
  • The ZEW indicator of Economic Sentiment for Germany decreased substantially in the current October 2021 survey, with the new reading of 21 points, which is the fifth time in a row that the indicator has experienced a fall. Such declines are mainly due to the persisting supply bottlenecks for raw materials and intermediate products.
  • Employment vacancies fell to 10.4M during the month, according to the US JOLTS report. This decline was well short of market expectations for 10.95M job postings. Such decline is due to a record 4.3M workers quit their jobs in August, led by food and retail industries.

Headliner to Watch

  • The FOMC minutes is due to release tomorrow. What the markets are looking at now is when tapering will eventuate. Though, any mention of raising rates sooner than expected might spook investors.
  • The unemployment rate in Australia is forecasted to be 4.8%, a slight increase compared to the previous actual figure of 4.5%.
  • US monthly PPI figure is expected to increase by 0.6%.

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Authors:
Antony Tan
Kerry Man