Market Talk – May 23, 2022

ASIA:

Southeast Asian nations are in store for a tougher trade environment as China’s economic growth slows due to hardline coronavirus controls, experts say, while the US attempts to boost engagement with the region are unlikely to offset falling demand. China’s economy is facing a number of headwinds – from new outbreaks to a downturn in the vast property sector – that threaten the government’s annual growth target of “around 5.5 percent”. Already, multinational banks including Goldman Sachs, Citi, JP Morgan and Morgan Stanley have cut their growth forecasts for the world’s No 2 economy to between 4 and 4.3 percent, citing zero Covid.

India on Saturday announced a series of changes to the tax structure levied on crucial commodities in a bid to insulate consumers from rising prices amid high inflation. India announced cut in excise duty on petrol by 8 rupees ($0.1028) per litre, and 6 rupees per litre on diesel. The new tax regime on petrol and diesel could result in a loss of about 1 trillion Indian rupees to the government in annual revenue due to the lower collection. The latest measures will be effective from May 22, the government said in a notification after the announcement by Finance Minister Sitharaman, who also urged state governments to follow suit with similar reductions on fuel prices keeping in line with federal plans.

The Indian government is also considering spending an additional 2 trillion rupees ($26 billion) in the 2022/23 fiscal year to cushion consumers from rising prices and fight multi-year high inflation, government officials told Reuters. The government estimates another 500 billion Indian rupees additional funds will be needed to subsidize fertilizers, from the current estimate of 2.15 trillion rupees, the two officials said.

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The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 262.49 points or 0.98% to 27,001.52
  • Shanghai increased 0.29 points or 0.01% to 3,146.86
  • Hang Seng decreased 247.18 points or -1.19% to 20,470.06
  • ASX 200 increased 3.30 points or 0.05% to 7,148.90
  • Kospi increased 8.09 points or 0.31% to 2,647.38
  • SENSEX decreased 37.78 points or -0.07% to 54,288.61
  • Nifty50 decreased 51.45 points or -0.32% to 16,214.70

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00545 or 0.77% to 0.70975
  • NZDUSD increased 0.00525 or 0.82% to 0.64585
  • USDJPY decreased 0.129 or -0.10% to 127.826
  • USDCNY decreased 0.03241 or -0.48% to 6.66246

Precious Metals:

  • Gold increased 3.47 USD/t oz. or 0.19% to 1,849.15
  • Silver decreased 0.017 USD/t. oz or -0.08% to 21.733

No economic news from last night:

Some economic news from today

Hong Kong:

CPI (YoY) (Apr) decreased from 1.70% to 1.30%

EUROPE/EMEA:

Britain is set to approve the sale of Premier League soccer Chelsea to a consortium led by Los Angeles Dodgers part-owner Todd Boehly, a source familiar with the situation told Reuters, after owner Roman Abramovich gave assurances over the deal. Russian Abramovich put the club up for sale in early March following his country’s invasion of Ukraine. The British government demanded assurances that Abramovich, who was sanctioned following the invasion – which Moscow calls a special operation – will not benefit from the sale. The UK government’s approval of the sale was being finalized on Monday night, the source said, though the deal also faces the need for EU approval, as Abramovich holds a Portuguese passport.

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The European Central Bank is likely to lift its deposit rate out of negative territory by the end of September and could raise it further if it sees inflation stabilizing at 2%, ECB President Christine Lagarde said on Monday. The ECB’s deposit rate is currently -0.5%, meaning banks are charged to park cash at the central bank, and has been below zero since 2014 as the central bank fought too low inflation. Headline inflation in the euro zone hit an all-time high of 7.4% in April and even measures that strip out food and energy far exceeded the ECB’s 2% target.

The major Europe stock markets had a green day:

  • CAC 40 increased 73.50 points or 1.17% to 6,358.74
  • FTSE 100 increased 123.46 points or 1.67% to 7,513.44
  • DAX 30 increased 193.49 points or 1.38% to 14,175.40

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.01133 or 1.07% to 1.06731
  • GBPUSD increased 0.00701 or 0.56% to 1.25608
  • USDCHF decreased 0.00788 or -0.81% to 0.96669

Some economic news from Europe today:

Germany:

German Business Expectations (May) increased from 86.8 to 86.9

German Current Assessment (May) increased from 97.3 to 99.5

German Ifo Business Climate Index (May) increased from 91.9to 93.0

US/AMERICAS:

The US announced progress on the Indo-Pacific Economic Framework with Asian partners including Australia, Japan, and Korea. The agreement would encourage countries to turn to the US rather than China for “economic leadership” in the Indo-Pacific region. China was angered by President Biden’s visit to the area, stating, “The main goal of Biden’s trip to South Korea and Japan is trying to form a new political posturing against China, by establishing an alliance around Washington in the Asia-Pacific region.” This adds more fuel to the ongoing trade war between the US and China who are both fighting for the title of “financial capital of the world.”

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US Market Closings:

  • Dow advanced 618.34 points or 1.98% to 31,880.24
  • S&P 500 advanced 72.39 points or 1.86% to 3,973.75
  • Nasdaq advanced 180.66 points or 1.59% to 11,535.28
  • Russell 2000 advanced 19.5 points or 1.1% to 1,792.76

Canada Market Closings:

  • TSX Composite advanced 15.69 points or 0.08% to 20,197.61
  • TSX 60 advanced 2.14 points or 0.18% to 1,222.49

Brazil Market Closing:

  • Bovespa advanced 1,857.94 points or 1.71% to 110,345.82

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil decreased 0.49 USD/BBL or -0.44% to 109.790
  • Brent increased 0.22 USD/BBL or 0.20% to 112.77
  • Natural gas increased 0.444 USD/MMBtu or 5.49% to 8.5270
  • Gasoline decreased 0.0433 USD/GAL or -1.13% to 3.7937
  • Heating oil increased 0.0251 USD/GAL or 0.67% to 3.7642

The above data was collected around 13:36 EST on Monday

  • Top commodity gainers: Natural Gas (5.49%) and Palm Oil (2.59%), Orange Juice (2.73%), Oat (3.84%)
  • Top commodity losers: Rhodium (-1.29%), Steel (-1.91%), Soybeans (-1.13%) and Gasoline (-1.13%)

The above data was collected around 13:42 EST on Monday.

BONDS:

Japan 0.241%(+0.2bp), US 2’s 2.63% (+0.040%), US 10’s 2.8514% (+6.31bps); US 30’s 3.05% (+0.061%), Bunds 1.009% (+6.7bp), France 1.5330% (+6.2bp), Italy 3.042% (+5.6bp), Turkey 23.05% (-7bp), Greece 3.734% (+0.7bp), Portugal 2.187% (+5.3bp); Spain 2.145% (+6.3bp) and UK Gilts 1.970% (+7.6bp).

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