Market Commentary - July 29, 2022

Wall Street stocks climbed on Thursday, with all the major indices rose by more than 1% as investor noticed hopes that the Fed could slow its pace of monetary tightening after the 0.75% increase of rates in this week. However, Fed chair Powell did comment that the pace of tightening is guided by the data.

Across the Atlantic, European equities also fared well yesterday. The broad-based benchmark STOXX 50 advanced over 1%, while CAC 40 hiked 1.3%. Regional shares hit a seven-week high as upbeat corporate earnings boosted the market sentiment, including the oil giant Shell as their current quarterly profit smashed its previous record.

In Asia, Australian shares rose nearly 1% on Friday morning, due to strong commodity prices which lifted mining and energy stocks. HK’s Hang Seng Index declined 2% before the mid-day break, dragged by its tech giants including Alibaba as it has dropped over 5%. Meanwhile, the Chinese president Xi Jinping warned Biden not to “play with fire” during their call on Thursday.

Oil price dropped slightly today on concerns about a potential global recession which could impede demand, with the WTI crude currently trading at $98.548 per barrel. Meanwhile, European gas prices jumped further after Russia threatened to further cut gas supplies to the region. Gold price rallied significantly to $1,760 per ounce, the biggest rally since March after the release of lackluster U.S. GDP data.

EURGBP chart (2022.7.29)

Figure 1 (Source: IS Prime) EUR/GBP daily: The British Pound has strengthened to a new three-month high against the euro, at 0.83770 as traders sold euro on concerns about an escalating energy crisis.

Headliner to Review

  • The U.S. Fed lifted its benchmark interest rate by 0.75% for the second month in a row as they anticipated that ongoing increase in the target range is appropriate.
  • The second quarter U.S. GDP turns out to be -0.9%, much worse than the expected figure of +0.4%. This makes the U.S. economy fell into a technical recession as the GDP figure declined two consecutive quarters.

Headliner to Watch

  • The Chinese manufacturing PMI is due to release next Monday, previous month it came out to be 51.7 points.
  • The U.S. ISM Manufacturing PMI is looking to print on next week, previously it reached 53 points.

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Authors:
Antony Tan
Kerry Man