Market Commentary - May 26, 2022

Wall Street stocks closed higher on Wednesday after the release of the Fed minutes which has reaffirmed the central banker’s determination of reining inflation, as the officials discussed to use more aggressive rate rises but at the same time concerned about its side-effects on the U.S. labour markets. All three major U.S. stock indices advanced on the day, with both the S&P 500 and Nasdaq up by 0.95% and 1.51% respectively.

Across the Atlantic, the European counterparts also had a fair performance on the day, with their local indices lifted by both the resource and bank sub-sectors. The broad benchmark STOXX 50 index rose 0.81%, while German DAX closed up by 0.63%. Banks are one of the best performers as they could benefit from higher interest rates, rose 1.1% to hit a fresh one-month high. In Eastern Europe, both the Russian and Ukrainian armies clashed around the city of Sievierodonetsk, which is in the Eastern Donbas region, with both sides facing a war of attrition whereby the Russian may struggle to sustain offensive while the Ukrainian do not have sufficient heavy weapons for effective counterattack.

In Asia, both the Australian and Japanese benchmark indices closed lower on Thursday, dropped by 0.69% and 0.27% respectively. In contrast, HK’s Hang Seng Index are also currently down by 0.75% even though it opened high today. Meanwhile, China’s Didi (equivalent to the U.S. Uber) have gained its shareholders’ approval to delist from the U.S. stock market, however, it still faces regulatory scrutiny from China as well as the local COVID-19 situation which have hurt their businesses.

Oil price still remain flattened today, looks like it has been rallying cautiously throughout this week on signs of tight supply while the EU having dissents with Hungary about whether to officially ban imports from Russia. Price of bullion was affected slightly by the Fed’s minutes of raising rates, as it sank marginally to $1,849.78 per ounce. Turkish lira continue to slide today, ahead of the central bank meeting in which the market expect them to hold its interest rate unchanged at 14% despite soaring inflation, currently at 16.3884.

NZDUSD charts (2022.5.26)

Figure 1 (Source: IS Prime) NZD/USD daily: Kiwi dollar jumped after the RBNZ raised the official cash rate yesterday. Looks like the currency pair bounced off a two-year low of 0.62164 recently to gradually trend higher.

Headliner to Review

  • The Reserve Bank of New Zealand (RBNZ) raised the cash rate by 50bps to 2.0%, in line with expectations. Their Monetary Policy Committee highlighted that the policy needs to be tightened “more and sooner” as it allows them to build buffers for the future in case of global economic uncertainties.
  • The latest figures of the U.S. durable goods orders rose 0.4% month-on-month, which is less than the forecasted figure of +0.6% and certainly overshadowed by the March figure of +1.1%.

Headliner to Watch

  • The final update of the U.S. UoM Consumer Sentiment Index for the month of May is due to release on Friday, projected to remain unchanged at 59.1, which is still the lowest reading since August 2011, following a dramatic fall from 65.2 in April.
  • The latest U.S. Core PCE Price Index will also update on tomorrow, with the market consensus of remain unchanged at 0.3%, though the personal spending figure is likely to decrease in April to a monthly rate of 0.7%, as higher cost pressures impacted consumers’ budgets.

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Authors:
Antony Tan
Kerry Man