Global Outlook (Quick Bites)

I will be posting a short summary of Global Outlook to monitor the market movements. I hope this will help us make sound investment decisions, and filter out the noise in the market.

Sep 2022

1st Sep: Markets remain nervous ahead of tomorrow’s US nonfarm payrolls report. The S&P500 slipped by 0.78% to bring the index to its worst month since June as Fed’s Mester reiterated that “even if the economy were to go into a recession we have to get inflation down” and supports lifting the policy rate to above 4% with no anticipated rate cuts in 2023. Oil also posted its third monthly decline due to ongoing growth slowdown concerns and despite Russia halting the Nord Stream gas pipeline to Europe. Meanwhile California has declared a state-wide grid emergency amid surging demand due to a heatwave. Elsewhere, a fresh record inflation print of 9.1% YoY (previously 8.9%) in the Eurozone saw ECB’s Nagel urging a “strong” reaction which added to market speculation of a jumbo 75bps hike next week and likely followed by another 50bps at the subsequent meeting. This contrasted with China whose official manufacturing PMI rose from 49 to 49.4 in July, but still stayed in contraction territory, whilst the nonmanufacturing PMI also slipped from 53.8 to 52.6 amid ongoing Covid outbreaks and lockdowns, property market turmoil and droughts. 

2nd Sep: : Stabilization ahead of tonight’s key US labour market report. The S&P 500 edged up 0.30% on a late session reversal while UST bonds slumped and sent the 2-year Treasury bond yield to another 15-year high at 3.50% and the 10-year yield up 6bps to 3.25%. The 4- and 8-week T-bills fetched yields of 2.47% and 2.73% respectively. The USD also rallied on expectations that the Fed may continue to hike 75bps at the 22 September FOMC and USDJPY went past the 140 handle. Fed’s Bostic (non-voter) opined that “we have to figure out how fast we are going to move our policy to try and arrest that inflation and to wrestle it back down to 2%”. Meanwhile, US’ initial jobless claimed fell to a 9-week low of 232k, while the manufacturing ISM was unchanged at 52.8 in August. Elsewhere, Russia is considering purchasing up to US$70bn in yuan and other “friendly” currencies to slow the ruble’s surge. Separately, China’s Chengdu is under lockdown due to COVID while Hong Kong is targeting to end hotel quarantine in November. 

5th Sep: Stronger US nonfarm payrolls data (315k versus market expectations for 300k) failed to support risk appetite as the unemployment rate unexpectedly jumped from 3.5% to 3.7% (with the labor force participation rate rising from 62.1% to 62.4% as more workers returned to the workforce) and the average hourly earnings eased to 5.2% YoY. The S&P 500 lost 1.07% to register its third weekly loss (longest since mid-June) while UST bonds rallied on Friday, led by the shorter tenors with the 2- and 10-year bond yields down 11bps and 6bps to 3.39% and 3.19% respectively. Weighing on market sentiments was also the worsening energy crisis for Europe amid news that Gazprom had halted gas supplies via the Nord Stream pipeline (which was supposed to reopen on Saturday after a 3-day maintenance period), likely in reaction to the G7 news of an agreement to implement a price cap on Russian oil. This prompted Germany to unveil a EUR65bn package to help consumers, with Chancellor Scholz saying that tapping the windfall profits of energy companies will yield “many, many billions” of euros and remains confident that there will not be blackouts during winter despite energy rationing. Meanwhile, China extended its lockdown in some districts in Chengdu, whilst the Biden administration is said to be considering measures to restrict US investment in Chinese tech companies

6th Sep:  With the US markets out for Labor Day holiday yesterday, market attention continued to focus on the energy woes plaguing Europe amid the indefinite shutdown of the Nord Stream pipeline

7th Sep: The unexpectedly strong US services ISM data, which improved from 56.7 in July to 56.9 in August, bolstered market expectations for a more hawkish Fed rate hike at the upcoming September FOMC. Both the business activity and new orders gauges rose to year-to-date highs, reinforcing the resilience of the US economy. The S&P 500 fell 0.41% while VIX rose to 26.91. The UST bond market tumbled overnight, with the 30- year yield exceeding its June 2022 high to rise 15bps to 3.49% 

8th Sep: Some respite as the S&P 500 rebounded 1.83% overnight, marking the biggest jump in a month, aided by the drop in oil prices which may cool inflation as WTI fell to US$81.84 per barrel on growing recession fears. UST bonds also rallied, pushing the 10-year yield down 9bps to 3.26%. The Fed’s Beige Book also noted that economic activity was unchanged on balance since early July, with most districts reporting steady consumer spending, solid leisure travel activity, but also falling home sales and production generally constrained by supply chain bottlenecks for critical components, albeit the future growth outlook remained generally weak with expectations for further softening of demand over the next 6-12 months. Fed’s Brainard reiterated “monetary policy will need to be restrictive for some time to provide confidence that inflation is moving down to target” and Mester also opined that “in formulating my monetary policy views, I will be guarding against declaring victory over the inflation beast too soon”.

9th Sep: Hawkishness is in as major central banks embellish their inflation fighting credentials! The ECB unanimously hiked 75bps while temporarily removing a 0% cap for renumerating government deposits which would reduce the incentive to shift cash into short-term debt until 30 April 2023.  ECB also cut its 2023 growth forecast from 2.1% to 0.9% (implying no recession, but just stagnant growth) but raised its inflation forecast to 2.3% in 2024.

12th Sep: Hawkish rhetoric continues to haunt financial markets, but this did not douse market enthusiasm which led to the S&P 500 gaining 1.53% on Friday while the 10-year UST bond yield was little changed at 3.31%. Fed's Waller said he supports "another significant increase" until he sees a meaningful and persistent moderation in the rise of core prices, while Bullard also said he is leaning "more strongly towards" a jumbo 75bps rate hike for the 20-21 September FOMC meeting. A San Francisco Fed study also suggested that inflation will only return to its 2% target at the beginning of 2025

13th Sep: The US equity rally extended overnight, with the S&P 500 clocking up another 1.06% gain to complete its best four-day surge since June, led by Apple on strong demand for iPhone 14 Pro Max, as well as hopes that US inflation is cooling. Oil prices rose while USD was lower against most G10 currencies. A US railroad worker strike by the end of this week, while Goldman Sachs is reportedly cutting hundreds of jobs. Elsewhere, the EU is seeking to curb power consumption, provide liquidity to energy markets, as well as cap excessive revenues of energy companies.

14th Sep: Fragile market sentiments cracked in the face of a nasty inflation print which disappointed market hopes for easing prices. The US headline CPI slowed from 8.5% to 8.3% YoY (0.1% MoM) but missed consensus forecast of 8.1%, while the core CPI accelerated more than expected from 5.9% to 6.3% YoY (0.6% MoM), driven by rental inflation that saw its biggest monthly surge as well as food, transportation, medical care and recreation services. This data print fuelled market speculation that the Fed would hike at least 75bps for the third straight meeting at the 22 September FOMC meeting, with some even anticipating a possible 100bps. The S&P 500 slumped 4.32% overnight in its worst session since 11 June 2020 and erasing nearly all the gains in the last fourday rally due to the drag by tech stocks

15th Sep: the S&P 500 recovered 0.34%. Elsewhere, ECB’s Holzmann warned that inflation is “likely to accelerate even more” and “we’ll continue to react in future” while France will cap electricity and gas price hikes at 15% for households and small companies next year.

16th Sep: the S&P 500 declined 1.13% overnight to its lowest level since July, with tech stocks leading the decline, as market players weighed the prospects of another 75bps at next week’s FOMC meeting. The World Bank warned that global growth is slowing sharply but global core inflation rate could stay ~5% in 2023 and global monetary policy tightening could give rise to significant financial stress and trigger a global recession next year.

19th Sep: FOMC anxiety abound ahead of the anticipated 75bps hike, with a tail risk of even a 100bps hike. The S&P500 fell 0.72% on Friday, marking its worst week since its June lows after FedEx withdrew its earnings guidance on weakness in Asia and Europe.

20th: Rebound in US equity markets saw the S&P 500 up 0.69% overnight despite a choppy session, with Apple and Tesla leading market gains after the worst weekly rout since mid-June. World Bank president Malpass said that China is “less eager to really stimulate this time” compared to previous global down cycles which in turn puts more burden on the US, and tips 2023 growth to slow to 0.5% and contract 0.4% in per capita terms which would meet the technical definition of a recession. 

21st: The S&P 500 slipped 1.13% overnight while VIX rose to 27.16. UST bonds slide with the 2- and 10-year yields up to 3.97% (+3bps and nearing the 4% handle) and 3.56% (+7bps) respectively, while the USD gained against most of its G10 counterparts. Meanwhile, Economist Nouriel Roubini tips a further 40% drop in stocks with a long and ugly US recession. Elsewhere, BOC deputy governor Beaudry opined that inflation is “headed in the right direction” but is “still too high”.

22nd: The Fed has signalled a total of 125bps by end of the year to around 4.4% and to reach 4.6% in 2023 before moderating to 3.9% in 2024. Global risk appetite did not react well to the Fed’s third 75bps rate hike to 3.25% with an even more hawkish bias, with the S&P 500 falling 1.71% to bring its plunge from the January to exceed 20%.

23rd: The S&P 500 tumbled to June lows with the main drag from tech stocks while the dollar mostly advanced. The hawkish message was reinforced by the BOE's second 50bps hike with three gunning for a larger hike. BI also surprised markets to opt for a 50bps hike (most aggressive move since mid-2018) to frontloading in anticipation of inflation peaking above 6% by end-2022 while core inflation will also hit 4.6%

24th: UK Chancellor Kwarteng scrapped the top 45% income tax bracket and cut the basic rate by 1ppt to 19% and pledged more to come, spooking markets about how they would pay for the largest tax cuts since 1972 which would cost GBP161bn over the next five years. The S&P 500 slumped 1.72% paled in comparison with the 2-year gilt which jumped as much as 57bps.  

27th: The BOE said it will make a “full assessment at its next scheduled meeting” on the impact of the government’s fiscal plan and the GBP drop with the pledge that it will not “hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term”, but financial markets were not impressed with the absence of immediate action. S&P 500 also fell 1.03% overnight. Central bank rhetoric remained hawkish with Fed’s Collins advocating “further tightening of monetary policy”, Mester calling for “further increases in our policy rate…to be in a restrictive stance… and remaining there for some time”. ECB’s Lagarde indicated that rate hikes is the most appropriate for fighting inflation and will only consider QT after completing interest rate normalization, whilst Nagel opined that “further decisive action is required to bring the inflation rate down to 2% in the medium term” and de Cos echoed the need to be “extremely vigilant” on inflation expectations. 

Aug 2022

1st: Strong market headwinds loom ahead for the week as China’s official manufacturing PMI unexpectedly contracted to 49 in July from 50.2 in June, while the non-manufacturing PMI also eased from 54.7 to 53.8. The S&P 500 rallied 1.42% on Friday to cap the best month since 2020 as market players hope the Fed will slow rate hikes after the US economy entered a technical recession in 1H22.

2nd: The S&P 500 snapped a three-day rally to fall 0.28% overnight after the US’ manufacturing ISM retreated from 53.0 in June to 52.8 in July

3rd: the S&P 500 fell 0.67% while UST bonds also traded in a choppy fashion with the 10-year bond yield jumping 18bps higher to 2.75% amid the tug of war between US-China tensions and Fed’s still hawkish rhetoric

4th: Risk appetite rebounded overnight with the S&P 500 snapping a two-day loss to close up 1.56% amid healthy US corporate earnings from PayPal and Moderna as well as robust economic data and as market jitters over US-China tensions (due to Taiwan) subsided slightly. 

5th: BoE hikes for the sixth consecutive time by 50bps to 1.75% in its largest move in 27 years with governor Bailey flagging that inflation may peak at 13.3% in October and that “all options are on the table for our September meeting and beyond that”, but warned that a recession will start in 4Q22 and last through 2023. Meanwhile, the S&P 500 edged down 0.08% overnight while UST bonds range traded yesterday with the 10-year yield hovering around 2.69% even as monkeypox is declared a public health emergency in the US. Fed’s Mester reiterated that the central bank is “committed to getting inflation” down to its 2% target

8th: the S&P 500 declined 0.2% on Friday while UST bond yields surged, led by the shorter tenors as market players repriced the Fed rate hike expectations.

10th: Crude oil prices saw choppy trade on news that Russian oil had stopped flowing to central European countries of Hungary, Slovakia and the Czech Republic last week according to Russian pipeline operator Transneft PJSC. The S&P 500 declined 0.42% overnight, dragged down by semiconductor companies after Micron cut its 4Q forecast. 

11th: Cooling US inflation gave risk appetite a boost overnight, sending the S&P 500 up 2.13% to a 3-month high and VIX down below the 20 handle for the first time since 4 April. Nasdaq also surged more than 20% from its June trough. Asian markets may be lifted today on hopes that the FOMC would reconsider another 75bps rate hike at the September FOMC meeting as US inflation is now cooling. 

12th: Post-CPI euphoria has evaporated, leaving the S&P 500 lower by 0.07% overnight while UST bonds also softened, with the 10-year yield up 11bps to 2.89%. China’s automotive sector continued to recover in July with sales rising by 29.7% YoY, according to the data from the China Association of Automobile Manufacturers. In addition, automotive production also rose by 31.5% YoY. The Association expects the automotive sales growth to remain steady in the next two months due to supportive policies and seasonal demand.

15th: News that a US congressional delegation led by Senator Ed Markey has landed in Taiwan for a 2-day visit with plans to meet Taiwanese President Tsai Ing-wen this morning mean US-China tensions may come to the fore again. The S&P 500 had rallied 1.73% on Friday to cap a fourth straight week of gains (the longest run since November)

16th: Despite the weak Empire State manufacturing index (-31.3 versus +11.1 previously amid sharp declines in orders and shipments) and soft NAHB housing market index (49 versus 55) data, the S&P 500 still added 0.4% overnight while VIX stayed below the 20 handle for the second session. Nasdaq also bounced, led by Tesla and Apple Inc as market toned down their expectations of aggressive Fed rate hikes. 

17th: The S&P 500 added 0.19% overnight, aided by Walmart Inc and Home Depot despite weakness in tech stocks. Oil also held near a six-month low amid concerns of slowing demand outlook and the potential return of Iranian supply. Meanwhile, Chinese Premier Li Keqiang urged six key provinces to boost growth measures and vowed to “reasonably” step up policy support. Separately, Germany may only have natural gas reserves for about 2.5 months if Russia cuts off supply completely

18th: The focus of the market overnight was the release of the minutes from the late July FOMC meeting. Officials expressed the need to slow the pace of rate hikes "at some point", noting the risk of over-tightening being "unacceptably high", despite price pressures. Still, the officials remained cautious of the significant risk of entrenched inflation, pointing out the risk that they "could tighten the stance of policy by more than necessary to restore price stability." 

19th: Fed officials pushed back against investor expectations that the Fed would start to cut rates next year.  Overall, the broadly still-hawkish Fed stance came at a time when the US labour market appeared to remain strong, with the initial jobless claims data declining on the week. The comments also came ahead of the Jackson Hole Fed symposium next week, whereby market watchers will be looking out for clues regarding the Fed interest rate path not just for the September meeting, but going into 2023, even as there may not be much new information in the end.

22nd: The S&P 500 fell 1.29% on Friday amid renewed Fed rate hike concerns.

23rd: Pre-Jackson Hole jitters – S&P 500 sank 2.14% overnight, weighed down by consumer discretionary stocks

24th: Risk sentiment consolidated lower slightly ahead of the Jackson Hole meeting this Friday as weaker than expected US new home sales fuelled the concerns of an economic slowdown. US new home sales tumbled more than expected by 12.6% MoM to a seasonally adjusted annual rate of 511K units, lowest since January 2016. June sales was also revised down by 5k units to 585k units. Minneapolis Fed President Kashkari said on Tuesday that it is very clear the Fed has to tighten monetary policy, stating that “When inflation is 8% or 9%, we run the risk of unanchoring inflation expectations and leading to very bad outcomes.” His biggest fear is that if the Fed is wrong that this inflation is embedded at a much higher level, then the Fed will have to be more aggressive than he anticipates.

24th: Risk sentiment consolidated lower slightly ahead of the Jackson Hole meeting this Friday as weaker than expected US new home sales fuelled the concerns of an economic slowdown. US new home sales tumbled more than expected by 12.6% MoM to a seasonally adjusted annual rate of 511K units, lowest since January 2016. June sales was also revised down by 5k units to 585k units. Minneapolis Fed President Kashkari said on Tuesday that it is very clear the Fed has to tighten monetary policy, stating that “When inflation is 8% or 9%, we run the risk of unanchoring inflation expectations and leading to very bad outcomes.” His biggest fear is that if the Fed is wrong that this inflation is embedded at a much higher level, then the Fed will have to be more aggressive than he anticipates.

25th: hawkish Fed rhetoric failed to dampen market sentiments overnight with the S&P 500 up 1.41% (on the back of Apple and Amazon.com) a

26th: the S&P 500 added 0.29% overnight after a three-day slump while UST bonds remained on the backfoot ahead of Fed Chair Powell’s speech and as US new durable goods orders rose more than expected by 2.2% in June. The 2- and 10-year yields jumped 9 and 6bps to 3.39% and 3.10%, while the US$45bn 5-year auction tailed at 3.23%. Meanwhile, China announced plans for a 19-point package to keep growth at a reasonable range, that includes a quota of more than CNY300bn for financial tools. Elsewhere,Thailand’s Constitutional Court has suspended PM Prayuth pending a court decision on a petition filed by opposition parties, with DPM Prawit as the new caretaker leader during this period. Separately, crude oil prices rose as US commercial crude oil stocks fell more than expected by 3.3 million barrels

Jul 2022

1st: Worst half-year close since 1970 for the S&P 500 amid persistent inflation and emerging recession fears. The S&P 500 fell 0.88% overnight whereas Chinese shares extended gains after China’s official manufacturing
and services PMIs expanded in June to 50.2 and 54.7 respectively

4th: Heightened US recession concerns. The S&P 500 gained 1.06% on Friday after a worst first half performance since 1970. Eurozone's inflation exceeded market expectations and hit another record high of 8.6% in June, up from 8.1%, whilst the unemployment rate fell to a record low of 6.6% too, which reinforced the case for ECB rate hikes starting this month when they meet on the 20th.

5th: President Biden may be announcing a rollback of some US tariffs on consumer goods imports from China this week, in a bid to contain domestic inflation surge. To placate those who are against the tariff pullback, in part because of the view that the US would lose a key negotiating leverage, he is likely to announce a new probe into industrial subsidies that may well lead to more tariffs in certain areas such as technology

6th: The US equity markets did manage to stage an intraday rebound, with the S&P 500 closing 0.16% higher while the Nasdaq was up by over 1.7%. The US dollar posted gains, trading at 1.027 against the Euro, with market chatters about reaching parity potentially.

7th: Minutes from the June FOMC meeting signaled that Fed officials saw the need to hike by either 50 or 75bps in the next meeting in July, viewing that it was crucial to maintain the central bank's credibility in fighting against inflation. Moreover, it noted that "an even more restrictive stance could be appropriate if elevated inflation pressures were to persist." The market sentiment took the FOMC minutes in its strides

8th: Pushback against recent recession concerns saw Fed governors Waller and Bullard reiterating the need for another 75bps rate hike at the upcoming FOMC meeting on 26-27 July. Waller opined that he definitely supports a 75bps rate hike in July, but probably 50bps in September and then after a debate whether to go back down to 25bps, while Bullard said the US economy has a good chance of a soft landing. 

12th: Stronger than expected US nonfarm payrolls which printed at 372k in June versus the market expectation for only 265k in May strengthen theFed's resolve to proceed with another 75bps rate hike at the upcoming
FOMC meeting later this month. Fed's Bostic voiced support for a 75bps rate hike amid the strong US economy and Williams opined that growth may slow to below 1% before rebounding to around 1.5% next year, whereas George (the dissenter favouring a 50bps rate hike in June) warned that “moving interest rates too fast raises the prospect of oversteering”. The S&P 500 fell 1.15% yesterday while the flight to quality lifted the USD (above 108 for the first time in two decades)

13th: Recession fears came to the fore again. The IMF has cut its US growth forecast to 2.3% this year and 1.0% next year, warning that the unemployment rate will increase from the current 3.7% this year to 4.6% next year and exceed 5% from 2024-2025 as the “policy priority must be to expeditiously slow price growth without precipitating a recession”

14th: US CPI rose 9.1% YoY in June, beating expectations. The market is now pricing in the possibility of almost a 100bps rate hike in next week's FOMC meeting. Inflationary pressures continue to swirl and show no signs
of abating despite the Fed's recent rate hikes, and the central bank may be coming under increasing pressure to step up its rate hike cycle.

15th: Market chatter continues to revolve over whether a 100bps rate hike is forthcoming from the Fed next week. Fed officials Bullard and Waller publicly continued to back a 75bps rate hike yesterday. US banks
earnings missed in some results released yesterday, casting a gloomy start to the earnings season.

18th: US equity market rebounded on Friday as June retail sales rose more than expected by 1.0% MoM and the University of Michigan sentiment index also surprised on the upside at 51.1 in July, with the 1- and
5-10 year inflation expectations gauges easing slightly to 5.2% and 2.8% (previously 5.3% and 3.1%). The S&P 500 gained 1.92%, snapping a 5- session losing streak as financial stocks rose, while VIX dipped to 24.23 on
Friday. Separately, the IMF is signalling it will cut its global growth forecast substantially from the current 3.6% in the upcoming review.

19th: News of Apple’s plans to pare back hiring in 2023 contributed to the softening of market confidence. The S&P 500 slipped 0.84% while UST bonds retreated

20th July: The S&P 500 rebounded 2.76% overnight, led by tech stocks. Netflix rose in extended trading after losing fewer customers (970k) than expected in 2Q, but is tipping flat margins due to a slowdown in revenue growth, whilst Johnson & Johnson cut its sales and profit guidance amid a stronger USD and rising costs. The US Treasury bond market sold off with the 10-year bond yield up 4bps at 3.02% while the USD also slipped.

21st S&P 500 added 0.59% in a choppy session overnight, although tech stocks pared gains after Google said it would briefly stop hiring. Tesla and Alcoa were among the gainers.

22nd: A surprise from the ECB which hiked 50bps yesterday instead of the 25bps it had guided earlier, with ECB President Lagarde warning that prices will remain “undesirably high for some time” but dampened expectations of another 50bps hike in September. The ECB also announced its Transmission Protection Instrument (TPI) to counter unwarranted, disorderly market dynamics and ensure that the monetary stance is transmitted smoothly across all euro area countries. Asian markets are likely to tread lightly today as they ponder the ECB’s next move as well as the upcoming FOMC meeting on 28 July

25th: The S&P 500 snapped three-day gains to decline 0.93% on Friday, while UST bonds rallied with the 10-year yield down 12bps to 2.75%. While the US’ July manufacturing PMI was relatively steady at 52.3, its services and composite PMIs slumped to contractionary territory at 47.0 and 47.5 (marking the first contraction in more than two years) respectively, down from 52.7 and 52.3 in June and suggesting the US economy is heading for a further slowdown. Market players have priced in the possibility that the Fed will hike faster and pause earlier, with a 75bps likely this week, followed by another 50bps and subsequently two 25bps hikes to end the year, but the Fed’s assessment of the recent soft patch and inflationary outlook will be key going ahead. 

26th:  The S&P 500 edged 0.13% overnight in a slow session, with Walmart trimming its profit outlook again to fall by up to 13% in the current fiscal year.

27th:  Down day for the S&P 500 which slipped 1.15% amid an ongoing tech rout as US consumer confidence fell to 95.7 in July, the lowest since February 2021. UST bonds treaded water as traders awaited the key FOMC policy decision, with the 10-year bond yield little changed at 2.81%. The IMF cut its 2022 and 2023 global growth forecast to 3.2% and 2.9% respectively, with US tipped at 2.3% and 1.0%, and China and Eurozone also facing downgrades to 3.3% and 2.6% accordingly for this year. Meanwhile, S&P has downgraded Italy’s sovereign rating outlook from positive to stable, citing political uncertainty following Draghi’s departure.

28th: the Fed did not hike 100bps and is more data-dependent going forward. The market interpretation is still leaning towards a deceleration in the expected pace of Fed rate hikes as Powell demurred from providing specific forward guidance, hence the S&P 500 rallied 2.62% overnight

29th: The US economy contracted 0.9% annualised QoQ in 2Q (consensus forecast: +0.4%), following the 1.6% decline in 1Q22 and signifying it has entered a technical recession. This fuelled market speculation that the Fed would slow its rate hike pace and possibly unwind some of its rate cuts next year. The S&P 500 rallied 1.21%, led by real estate, while VIX dipped to 22.33. The IMF has pared its 2022 and 2023 growth forecasts for the Asia Pacific region to 4.2% (-0.7% points) and 4.5% (-0.6% points) to reflect the spillover from the Ukraine war, China’s slowdown and tightening of financial conditions. 

Jun 2022

  • 1st: US markets reopened to another choppy session. Rising fuel cost, broader global inflation, boosting calls for a 50bps move by the ECB on the Jun 9 meeting, even as key officials such as President Lagarde and Chief Economist Philip Lane had signalled that quarter-point increases are more likely.
  • 2nd: Investors are gauging the impact of the start of the Fed's quantitative tightening move, positive sentiments of China’s easing lockdown measures, inflation woes, Russia’s potential exit from the cartel
  • 3rd: OPEC+ agreed to up the degree of its oil output hike by about 50% to 648k barrels per day for July and August (supply boost amounts to just 0.4% of global demand over the period) Fed Vice Chair Lael Brainard downplayed the idea of a pause in the September FOMC meeting, saying "Right now it's very hard to see the case for a pause." She added that, if inflation persists, there is a case for a 50bps hike in that meeting as well, following similar moves in June and July.
  • 6th: The ECB, in particular, is set to end its bond purchases on Thursday - potential interest rate hike as early as July this year. Other central banks are also expected to dial up their hawkishness as inflation expectations become increasingly entrenched (prompting more aggressive monetary policy tightening in advanced economies)
  • 7th: Overnight jitters on Wall Street is weighed against a potential easing of regulatory constraints on Chinese tech companies. Market sentiment in China continued to improve on Monday thanks to the improving Covid situation. Adding to this positive sentiment is the news that Chinese regulators are concluding investigations into tech company Didi, which will allow its app to be restored to app stores very soon.
  • 8th: The World Bank further cut its 2022 global growth forecast to 2.9% YoY, from 4.1% and 3.2% in January and April 2022 respectively (rising inflationary pressures and interest rates). China’s gaming regulator issued 60 gaming publishing licenses. This is the second batch for this year after the regulator froze the approval for nearly eight months. This may bring relief to China’s tech sector as this may be a signal that the regulatory crackdown may have already peaked
  • 9th: Wall Street was hit with losses overnight and amid news of the OECD’s global growth forecast downgrade from 4.5% previously to 3.0%.
  • 10th: Wall Street endured a tough session on the back of the hawkish ECB and partial Shanghai lockdown, with the S&P 500 index losing 2.4%. The ECB kept benchmark rates unchanged as widely expected and will officially end its net asset purchase programme on 1 July, as announced in yesterday’s monetary policy meeting. It also said it will raise its interest rates by 25bps in next month’s meeting and may possibly increase the hike to 50bps in the September meeting. The inflation forecast for the Eurozone has been raised from 5.1% to 6.8% in 2022, and 2.1% to 3.5% in 2023.
  • 13th: US CPI accelerated to 8.6% YoY in May, beating expectations of a 8.3% YoY increase and April’s figure of 8.3% YoY. The print of 8.6% YoY is also a fresh high since the inflation crisis of 1981/82. Markets are now expecting an even more aggressive tightening stance from the US Federal Reserve on the back of Friday’s inflation data. Fuel oil (+16.9% MoM), airline fares (+12.6% MoM), piped utility gas services (+8.0% MoM) and gasoline (+4.1% MoM) led the price increase across the CPI baskets. More volatility is expected in the markets in the coming week, with stocks likely to face selling pressure and bond yields possibly inching higher. For the week ahead, the FOMC is expected to deliver a 50bps rate hike as indicated in the Fed minutes released back in May. However, markets will be on the lookout for any hints regarding its future rate hike trajectory which will steer their expectations of the Fed’s degree of aggressiveness and the possibility of a recession.
  • 14th: The S&P 500 index fell 3.9% overnight and is now 22% down from its January high. US 10Y Treasury yield hurdled some 20.4bps in a single session to close at 3.36%. Market chatter is growing that the Fed may hike more than 50bps in this week’s FOMC meeting. The risk-off momentum is likely to carry on through the week

Weekly macro report (15th June)

Markets are expecting the FOMC to raise the Fed funds rate by 50bps over its two-day meeting this week. This comes after the red-hot inflation print released last Friday showed that inflation has yet to peak in March, fuelling concerns of a possibly more aggressive Fed in order to rein in price increases, which may however, tip the economy into a recession.

World Bank cut its 2022 global growth forecast from 4.1% to 2.9% and warned that the
global economy could plunge into a period of stagflation which will draw parallel to that of
the 1970s. This is almost half the 5.7% growth expansion seen in 2021.
Growth is predicted to float around the 2.9% level in 2023 and 2024, and inflation in most
economies is expected to remain above target levels.

Separately, OECD has also revised its 2022 global growth forecast downward from 4.5%
previously to 3.0%, and expects growth to slow further in 2023.

16th: The Fed hiked 75bps to 1.5-1.75% in its biggest increase since 1994 and signalled that the benchmark
rate may rise by another 175bps to hit 3.4% by year-end and reach 3.8% by end-2023 before easing to 3.4% by end-2024. The S&P 500 ended a 5-day rout to rally 1.46% while UST bonds also gained with the 10-year yield down 19bps to 3.28%.

  • 20th: Markets were whipped last week and might continue to face more of the same selling pressure this week. An outsized 75bps rate hike from the Fed last week turned the screw on spec longs, and Powell’s testimony before Congress this week may shed further light on the Fed’s decision. The crypto space continues to suffer from the most intense selloff across nearly all asset classes.
  • 21st:Markets have taken a beating for more than a week now and we expect bearish pressure to possibly sustain in the sessions ahead.
  • 22nd: The US markets reopened yesterday after the long holiday weekend on a strong footing. The S&P 500 rose 2.45% while the Nasdaq was up by 2.51%.
  • 23rd: The Wall Street rally snapped as Fed Chair Powell noted the possibility of US recession risk. Fed Chair Jerome Powell said that a US recession is "certainly a possibility" in a Senate testimony yesterday and that it will be "very challenging" to achieve a soft landing for the economy.
  • 24th: Fed Chair Powell reiterated his "unconditional" commitment to fight inflation in the second day of Congressional testimony. While more rate hikes are still seen to be coming just as the Fed telegraphed, the uptick in recession concerns has been getting more palpable.
  • 27th: US equity markets capped Friday with a strong rally despite a soft University of Michigan print (at a record low of 50) which saw its inflation expectations gauge revised lower for June from a 14-year high to 3.1% for the next 5-10 years. The S&P 500 rallied 3.06% in its biggest gain since May 2020, while VIX declined to 27.23. UST bonds also bull-steepened on Friday with the 2- and 10-year bonds yields falling to 3.06% and 3.13% respectively, as bond investors fluctuate between inflation and recession fears
  • 28th: The S&P 500 closed lower by 0.3% in low volumes ahead of the half-year end. Weak overnight leads from Wall Street.
  • 29th: Tech down amid recession angst. Nasdaq slumped 3% as recession fears loom large after the US Conference Board’s consumer confidence slid to 98.7 in June, the lowest since February 2021.
  • 30th: Financial markets continue in a holding pattern amid hawkish central bank rhetoric at the ECB Forum in Sintra. Fed Chair Powell commented that the US economy is well positioned to handle tighter policy, whilst Mester said she supports a 75bps rate hike in July and wants to see rates above 4% in 2023 as longer-term inflation expectations are rising. Meanwhile, ECB’s Lagarde warned that the EU will not get back to the environment of low inflation, while Simkus opined that a 50bps rate hike in July is very likely as the central bank should move decisively towards policy normalization, and Lane also said there is a need to move away from very low rates but also being data dependent

May 2022

  • 4th: Bracing for the Fed's expeditious rate hike trajectory and Quantitative Tightening strategy and also the possibility of 75bp rate hikes), coupled with concerns about China's regulatory tightening (especially for tech companies)
  • 5th: 50bps hikes will be the pace going ahead according to the Fed. The FOMC unanimously hiked 50bps for the first time since 2000 to 0.75-1.0%
  • 9th: Future types of power in Singapore may include solar, wind, geothermal and hydro. Chinese Premier Li warned of a “complicated and grave” employment situation amid efforts to contain Covid infections through tightening curbs in Beijing and Shanghai
  • 10th: Concerns over supply chain disruptions and stalled economic growth increasingly grew
  • 11th: Fed officials reiterated their preference for continued 50bps hikes over 75bps hikes overnight
  • 12th: The market, as implied by the Fed fund futures, are still pricing in a 50bps rate hike by the Fed across the next three FOMC meetings (June, July, September), despite the relatively strong US April CPI figure.
  • 13th Taming inflation was still the Fed’s priority at this point and reiterated the June and July FOMC meetings are likely to see 50bps hikes, although he has not ruled out the possibility of 75bps hikes down the road.
  • 17th: China's economic slowdown was more apparent in April
  • 18th: Central bank would continue to hike interest rates until inflation comes off in “a clear and convincing way” even if it requires going past neutral and therefore brings some pain to the US economy
  • 19th: US consumption impacted by high inflation. “if there are no significant changes in the data in the coming weeks, I expect two additional 50bps rate hikes in June and July” and “after that, I anticipate a sequence of increases…at a measured pace”
  • 20th: USD weakened, Fed is poised to raise interest rates by 50 basis points
  • 23rd: US growth slowdown and inflation concerns
  • 24th: Some recovery in risk appetite overnight after US president Biden signalled for some concession on China tariffs. Issues include persistent global supply chain problems, elevated food and energy prices, unresolved Russian-Ukraine tensions, China’s Covid-related lockdowns, Malaysia will halt chicken exports from 1 June (About 34% of S’pore’s chicken imports last year came from Malaysia) and recent emergence of protectionistic measures in various countries due to growing food inflation and security concerns. Fed’s Bostic opined it “might make sense” for a rate pause in September after the two anticipated 50bps rate hike in June-July to assess the impact on inflation and the economy.
  • 25th: Tech down – the S&P 500 slipped 0.81% overnight due to the drag from tech stocks including Snap which fell a record 43%
  • 26th: Fed minutes signal “strong commitment and determination” to restore price stability by continuing with 50bps rate hikes at the “next couple of meetings” and noted that a “restrictive stance of policy may well become appropriate”. FOMC minutes were not more hawkish than expected.
  • 27th: US market sentiments continued to improve overnight
  • 30th: Improving risk appetite on Friday. Fed’s Bostic opined that the Fed may pause rate hikes in September, prompting market to price in some relief to the Fed’s aggressive 50bps rate hikes sooner rather than later. 

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