Market Commentary - May 18, 2022

U.S. equities rose on Tuesday as strong retail sales and factory production data indicated the economy remains resilient even with high inflation. Both the S&P 500 and Nasdaq indices advanced over 2% on the day, with the financial stocks leading the way especially Citigroup, in which its share price rose 7.56% after Warren Buffett took new stakes in the company. Walmart is the worst performing stock among the major indices, dropped drastically by over 11% as the retail giant missed earnings estimates.

European shares ended higher on Tuesday as well, mainly due to the recovery of demand from China as the local authorities are looking to relax the COVID-19 restrictions, after Shanghai achieved three straight days of zero cases outside the quarantine zones, which in turn boosted investors’ risk appetite. In terms of the war in Ukraine, around 265 Ukrainian soldiers surrendered in the steel factory of Mariupol, after weeks of siege by the Russian forces. Russian president Putin said the surrenders will be treated according to the relevant international laws; however, it is yet unclear whether these soldiers would be treated as war criminals or prisoners of war.

In Asia, the Japanese blue-chip index Nikkei 225 closed up by 0.94% on Wednesday, with the tech heavyweights leading the rally after rebound from Wall Street shares the night before. HK’s Hang Seng Index rose marginally by 0.2%, managed to stay above the psychological level of 20,000 points after China’s top economic official pledged to support the local tech companies which in turn led to a big rally of tech stocks since yesterday.

Price WTI crude edged up continuously in the past few days, currently trading at $113.685 on expectations of easing lockdown restrictions in China, which could strengthen demand. Bitcoin is now back to $30K, along with other major cryptocurrencies which traded higher. Aussie dollar made a significant comeback in the last few days to be back above $0.7, after it made a low of $0.68287 on last Thursday, the lowest point since June 2020.

XAUUSD charts (2022.5.18)

Figure 1 (Source: IS Prime) Gold daily: Price of the yellow metal has fell back to the low earlier this year, as a strengthening dollar make the outcome of the gold lacklustre, however, looks like the decline has stabilized and we shall see whether its price is able to hold it at $1,800 or not.

Headliner to Review

  • Adjusted GDP increased 0.3% in the euro area for the first quarter of 2022, while its employment figure increased 0.5%. Both the GDP and employment exceeded figures from the previous periods.
  • U.S. retail sales rose 0.9% month-on-month in April, slightly below the expected figure of 1%. However, the respective core retail sales performed better by increasing 0.6% v.s. forecasted figure of 0.4%. Overall, seems U.S. households continued to spend despite inflation, thanks to their accumulated savings and soaring asset prices.

Headliner to Watch

  • Unemployment rate in Australia is due to release on Thursday, expect to further tick down to 3.9%, and it would be the first time on record to see the figure below 4%.
  • We would also expect to see a slight decline of the U.S. Existing Home Sales figure, forecasted to be 5.65M v.s. 5.77M from the previous month.

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Authors:
Antony Tan
Kerry Man