Market Commentary - October 22, 2021

Wall Street touched records highs on Thursday, with the S&P500 surpassing its previous peak reached seven weeks ago boosted by strong corporate earnings, bolstering investor sentiment. Led by stocks such as Microsoft, Netflix and Tesla, with the latter rising to all-time highs after beating earnings estimates late Wednesday. Likewise, tech-focused Nasdaq added 0.62%.

European stocks steadied at six-week highs yesterday as buying of defensive and growth stocks helped offset losses in miners and disappointing earnings forecasts. The Europe-wide STOXX 50 indice ended down 0.1% by session close, whilst the FTSE 100 slipped 0.45% as mining constituents exposed to China’s slowing economy dropped.

Late Asia saw the Nikkei 225 rise on Friday, recouping early session losses, after news that China Evergrande Group wired funds to a trustee account on Thursday for a bond interest payment due Sept.23. The Hang Seng benchmark ascended narrowly by 0.44% to close at 26,132.9 points during the morning session. Meanwhile, Australian shares were flat on Friday, with losses in major miner on weaker commodity prices offsetting gains in travel stocks, as Melbourne, the country’s second-largest city emerged out of the world’s longest COVID-19 lockdown.

Brent crude settled 1.4% lower to $84.61 a barrel but remained close to a three-year high. Sterling softened slightly against the dollar, losing 0.3% to $1.38, as a warning by UK health secretary that Covid-19 cases could hit 100K a day reviving concerns about the nation’s economic recovery. Meanwhile the Turkish Lira dropped 3.3% to hit an all-time low of at 9.52 against the dollar after the country’s central bank slashed its interest rate by 2% to 16%, a much deeper cut than analysts had expected.

image_2021_10_22T05_48_21_120Z (1)

Figure 1 (Source: IS Prime) USDTRY Daily : Deep cuts in policy rate ensured heavy outflows in the Turkish Lira as confidence in the nations central banking system weakens

Headliner to Review
  • The newest US unemployment insurance weekly claims are 290K, a decrease of 6,000 from the previous week’s revised level. This is the lowest level for initial claims since March 14, 2020.
  • The Australian Flash Manufacturing PMI rose from a final reading of 56.8 in September to 57.3 in October, printing a four-month high. Output and new order growth accelerated in their second consecutive months of expansion amid reports of better economic conditions and confidence.

Headliner to Watch

  • The US Flash Services PMI is expected to move up marginally to 55.3 from 54.9 prior. However, an unequal recovery across the US due to varying levels of COVID restrictions still in place is likely to distort the figure.
  • The German ifo Business Climate index is due to release in next Monday, with the previous figure reaching 98.8 points.

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Authors:
Antony Tan
Kerry Man