Your bite-sized weekly update (15 Oct)

By Beansprout • 15 Oct 2022 • 0 min read

Red hot inflation, surging T-bill yields and selloff in chipmakers.

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THIS WEEK IN MARKETS

The one thing that everyone is talking about these days is inflation. 

Investors were hence disappointed when the US consumer price index (CPI) continued to rise, with core inflation hitting a 40-year high. 

This effectively dashed any hopes that the US Federal Reserve would reverse on its aggressive interest rate hikes anytime soon. 

Closer to home, the Monetary Authority of Singapore (MAS) warned that price increases could be persistent for the remaining of the year and into 2023. 

What are we doing to cope with high inflation? We share some tips here.

IMPORTANT

Price chart 15 Oct
Source: Bloomberg. Price as of market close on 14 Oct
  • Persistent inflation. US Consumer Price Index (CPI) rose 8.2% in September compared to the previous year, above market expectations of a 8.1% increase. The persistent inflation data reinforced investors expectations that the Fed will raise interest rates by another 0.75 percentage points (0.75%) in November. 

  • More pain. The International Monetary Fund projected that global growth will slow to 2.7% next year, lower than its July forecast of 2.9%, and warned that 2023 will feel like a recession for many globally.

  • Close shave. Singapore avoided a technical recession after its economy grew by a stronger than expected 1.5% on a quarter-on-quarter seasonally adjusted basis in Q3 2022, reversing the 0.2% contraction in Q2. The MAS tightened its monetary policy for the fifth time since last year as it expects the global economy to face “high inflation and lower growth next year”.

ICYMI

  • US banks started the results season with mixed results. JP Morgan (JPM) and Citigroup’s (C) earnings beat market expectations, boosted by higher net interest income. However, Morgan Stanley (MS) reported earnings below market expectations as its investment bank was impacted by weaker fee income. 

  • Global semiconductor stocks tumbled following the US government’s new restrictions on semiconductor exports in China.

  • Intel (INTC) was planning to cut thousands of jobs to deal with a slowdown in personal computer market according to a Bloomberg report. 

  • AEM fell to a near two year-low due to concerns about its exposure to Intel.  

  • TSMC slashed its 2022 capital spending target by roughly 10% to $36 billion, suggesting that the firm is bracing for a broader than anticipated downturn. 

  • Applied Materials (AMAT) lowered its current quarter revenue outlook due to the negative impact of new US regulations restricting exports to China. 

  • Rivian (RIVN) recalled nearly all its vehicles to fix potential steering issues. 

  • SPH REIT has announced a 2.2% increase in distribution per unit to 5.52 cents for 12 months FY2022 ended Aug, as it benefited from a recovery in tenant sales. 

Source: Bloomberg, CNBC, Business Times, Edge Singapore

THE BIG IMPORTANT STORY

 6-month T-bill interest rate surged to 3.77% per annum! Best deal in town?

In the latest auction on 13 October, the cut-off yield on the Singapore 6-month T-bill auction surged to 3.77%. The cut-off yield on the 1-year T-bill auction was at 3.72%.

6 months tbill interest rate
 

WHAT’S UP THIS WEEK

The week-long Communist Party Congress kicks off in Beijing on 16 October, as President Xi Jinping is widely expected to take a third term in office. Investors will be looking out for any potential shifts in policies towards China's zero-Covid approach, its economy, push for common prosperity and Taiwan.

The earnings season swings into high gear with the results of Tesla and Netflix expected to be closely watched.

Monday, 17 Oct 

  • US: Bank of America Corp. earnings

Tuesday, 18 Oct 

  • US: Goldman Sachs, Johnson & Johnson, Netflix Inc earnings

Wednesday, 19 Oct 

  • US: Tesla earnings

Source: SGX, Bloomberg, Refinitiv

THAT’S INTERESTING

Say hi to the world's richest perfume salesman. Elon Musk launched a new perfume called “Burnt Hair”, which can be purchased for US$100 per bottle. Musk shared that he has sold 20,000 bottles of the perfume which smells like “repugnant desire”, bringing in sales of close to US$2 million. On his website promoting the perfume, he claims that it's “just like learning over a candle at the dinner table, but without all the hard work.”  

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