Ongoing Market Commentary: Positive cues from Wall Street

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects.  When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks.  The medium- to long-term consequences, on the other hand, could be significant.  It is possible that we are at the beginning of a new bloc formation or a new Cold War.  This would put a significant damper on globalisation and further fuel higher structural inflation. 

US stocks mounted a late session turnaround Monday, with the Nasdaq gaining 1.6% despite falling as much as 1.07% earlier in the session. The S&P 500 added 0.6% after touching a new low for the year earlier in the day while the Dow added 0.3%. The communication services, technology and consumer cyclical sectors led the advance, while real estate, consumer defensive and utility stocks performed worst. Meantime, the main bourses in Europe closed the session sharply lower as mounting worries about global economic growth and the looming US Fed rate hikes kept sentiment subdued.  

Summary

• Asian markets are trading mixed in thin trading on Tuesday due to a holiday in most markets, despite the broadly positive cues from Wall Street overnight. 
• European equity futures are pointing to a positive start today while their US counterparts are seen building further on yesterday’s gains. 
• Oil prices rose on Tuesday, extending gains from the previous session, as the European Union firmed up plans to tighten sanctions on Russia this week, with Germany saying it was prepared to back an immediate embargo on Russian oil. 
• The Reserve Bank of Australia raised the cash rate by 25 bps to 0.35%, ahead of analysts estimate for a 15 bps hike. This was the first hike in more than ten years, with policymakers flagging further tightening to come. Policymakers said the economy had proven to be resilient while inflation had picked up more quickly, and there was also evidence that wage growth was picking up. 
• The ISM Manufacturing PMI for the US fell for a second straight month to 55.4 in April from 57.1 in March and compared to market forecasts of 57.6. It was the lowest reading since July 2020, as a slowdown was seen in production, new orders, and employment. 
• BNP Paribas first quarter profit rose 19.2% year over year, reflecting the outperformance of its corporate and institutional banking unit, along with the strong growth in commercial and personal banking. Looking ahead, the bank maintained its target of over 3.5% annual revenue growth from 2022 to 2025, with an average annual net income growth of at least 7% over the same period. 
• HSBC Holdings’ largest shareholder, Chinese insurance giant Ping An has told the bank to split its Asian and western operations. Ping An argues that an independent Asia business listed in Hong Kong would have higher profitability, lower capital requirements and greater autonomy to make decisions. 
• Alibaba shares plunged around 9% on Tuesday after state broadcaster CCTV reported that Chinese authorities had acted against a person surnamed Ma, before recouping losses as the report was later revised to clarify that it was not the company’s founder Jack Ma. 
• Elon Musk is in talks with large investment firms and high net-worth individuals about taking on more financing for his $44 billion acquisition of Twitter and tying up less of his wealth in the deal. 
• Citigroup was behind a flash crash in Europe on Monday that sent shares across the continent tumbling after a sudden 8% decline in Swedish stocks.