Market Commentary - October 26, 2021

US equities continued its rally on Monday as investors prepared for a flurry of big tech earnings reports, delivered against a backdrop of elevated inflation and signs of impending monetary policy tightening. The S&P 500 index edged up 0.47% while Nasdaq rose 0.9%. News that car rental company Hertz had ordered 100,000 vehicles from Tesla took its shares 12.6% higher to close at $1024.86, hitting a record high once again.

European stocks closed flat on Monday, as gains in banks and commodity-linked sectors were offset by losses in industrial stocks on rising bond yields alongside an outlook that the telecom sector is deteriorating. EURO STOXX 50 index closed slightly lower by 0.5%, while FTSE 100 were up narrowly by 0.25%. HSBC Holdings gained 1.9% as concerns about pandemic-related bad loans were replaced by a surprise 74% rise its third-quarter profit and $2bn buyback announcement.

In Asia, Japan’s Nikkei 225 index rallied strongly on Tuesday morning amid earnings optimism, following gains on Wall Street overnight that took the Dow and S&P 500 to record highs. The Nikkei added 1.75% to 29,100.57 as of the midday break. On the other hand, China stocks edged up as well, led by IT stocks while sustained worries over a planned pilot real estate tax scheme weighed on sentiment.

US oil prices rose above $85 a barrel for the first time in seven years, as traders bet that crude supplies would not keep pace with fast-rising global demand and analysts said a wider energy crunch was spreading to petroleum markets. Meanwhile, the Turkish Lira swung on Monday after President Erdogan’s threat to expel 10 western ambassadors added to intense pressure on the currency, triggered by worries over the country’s economy. The currency fell as much as 2.8% from Friday’s level to 9.84 early Monday morning in Asia but recovered nearly all of its losses by the afternoon session.

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Figure 1 (Source: IS Prime) SPT.CO.US Daily : Crude advance persist amid global demand far outpacing supply that's constrained.

Headliner to Review
  • The German ifo Business Climate Index fell to 97.7 from an upwardly revised 98.9 in September. Such reading was the lowest since April and undershoot the market consensus forecast of 98.2. Supply problems are giving business headaches as capacity utilization in manufacturing was falling.

Headliner to Watch

  • Australia releases quarterly CPI figures on Wednesday following a period rocked by extended COVID-19 lockdowns and supply chain disruptions, with the market expect the figure to increase marginally by 0.8%.
  • Bank of Canada (BoC) meeting is due to occur on Wednesday as the central bank is widely expected to keep the benchmark interest rate at the record low of 0.25%.

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Authors:
Antony Tan
Kerry Man