Key Market Highlights
US markets recovered with $S&P 500(.SPX)$ up by 3.5%, after last week's brutal correction. Crude oil$Light Crude Oil - Jul 2022(CL2207)$ which peaked above US$122.1 per barrel earlier in the June, corrected from the recent high to US$103.5 on recessionary fears that may reduce the demand for crude.
Markets should welcome this as this gives the Fed more maneuverability in its policies given that energy prices have been a key factor in rising costs. US 10-year yields pulled back sharply from the top of 3.47% to 3.1%, as investors could have overpriced the US rate hike cycle and could see a fourth US bear market rally YTD.
Nikkei fell by -1.7% during the week, as yen continue to be pressured plunging to 1998 lows as globally rates are on the rise. While Europe’s Stoxx 50 was little changed for the week, as the ECB will raise is interest rates above zero.
S&P 500 & Nasdaq Index (YTD)
China continued its recovery, with $HSCEI(HSCEI)$ index up 1.4% with investors bottom fishing. President Xi, in a rare keynote speech has vow to meet the economic growth targets despite the “zero-covid” policies that have been dragging down growth. China government have guided for a 5.5% GDP growth earlier this year, however, most economists have a lower-than-expected forecast. Thus far investors have welcomed Chinese government’s priority to arresting the growth slow down with a slew of stimulative fiscal and monetary policies.
Performance Table (Total Return %)
China EV recovery. Electric Vehicle manufacturers in China have been seeing increased investor momentum particularly we saw China’s NEV continue to register strong sales momentum with lock downs easing. Various local government have also been promoting stimulus measures and boosting NEV quota to stimulate NEV demand. Favorable new product cycles of Nio’s $NIO Inc.(NIO)$ ET5 sedan, Li Auto’s $Li Auto(LI)$ L9 Suv, and Xpeng’s $XPeng Inc.(XPEV)$ G9 Suv provides a strong backdrop for recovery in 2H22 onwards. Markets are also expecting that the State Council could potentially maintain subsidies beyond 2022, which could be another tailwind for the sector.
Healthcare sector resilience.Over the last week, the healthcare sector was the best performing sector, up 6.4%, outperforming the recovery of the S&P500. Large capitalization pharmaceuticals the likes of $Johnson & Johnson(JNJ)$,$Pfizer(PFE)$, and $AbbVie(ABBV)$, continue to see show defensive qualities given their valuation discount to major US indices with counter-cyclical qualities in an environment of uncertain macroeconomic uncertainties.
US Homebuilders slowing.US homebuilders reported strong results with $KB Home(KBH)$and $Lennar(LEN)$ reporting earnings above expectations fueled by strong sales due to soaring average selling prices. However, both companies do see the impact of higher mortgage interest rates resulting in a moderation of sales going forward, especially after the pandemic-led boom last year. Affordability of homes has been a key issue given that both prices and financing have challenged new home buyers.
US 10 Year Yield (%)
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