Your bite-sized weekly update (24 Sep)

By Beansprout • 24 Sep 2022 • 0 min read

Fed rate hike driving pain across stocks, bonds and currencies

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THIS WEEK IN MARKETS

When US Fed Chairman Jerome Powell warned at the Jackson Hole meeting last month that the Fed’s plan to bring down inflation would cause some ‘pain’, very few could imagine the extent of the damage. 

And pain was what we saw in the global financial markets in the past week. 

After the Fed’s announced a 0.75 percentage point rate hike and projected that interest rates will be higher for longer, stocks and bonds sold off sharply. 

The only asset that investors tried to grab hold of was the US Dollar, but this came at the expense of many other currencies. 

It does seem like there are many risks to look out for. Investors are increasingly concerned about emerging economies’ ability to repay their US dollar denominated debt. The European energy crisis remains unresolved. Putin has just raised the stakes in the Ukraine war by ordering the partial mobilisation of the Russian population.  

Where’s the bright spot you may ask?

If you are a saver and holding on to some spare cash, then there’s much to cheer as interest rates go up. 

PSA: There’s a upcoming 6-month Singapore treasury bill auction this week that many are eyeing after the cut-off interest rate at the previous auction reached 3.32%.

IMPORTANT

stock market update
Source: Bloomberg. Price as of market close on 23 Sep
  • Higher for longer. The US Federal Reserve (Fed) raised its benchmark interest rate by another 0.75 percentage points to 3.0-3.25% as expected. Notably, the Fed is projecting that interest rates will be higher for longer. Interest rates are expected to peak at 4.6% in 2023, and are not expected to start falling until 2024. 
  • Jump in bond yields. The US 10-year Treasury bond yield surged to 3.69% from 3.45% the week before. The US 2-year Treasury bond yield rose to 4.21% from 3.87% the week before. This makes the yield curve more inverted than before, driving concerns about a potential economic recession. 
  • Big currency moves. The US dollar jumped to a new 2-decade high after the aggressive US Federal Reserve rate hike. Japan intervened to prop up the yen. The British pound slumped against the US dollar after the new British finance minister announced unleashed historic tax cuts and huge increases in borrowing. 

ICYMI

  • Volkswagen AG intend to raise 9.4 billion euros from the initial public offering of its iconic sports-car maker Porsche AG in what could be Europe’s largest listing in more than a decade.

  • XPeng's (XPEV) newest model, G9 SUV, will likely to sell better than its current most popular car, according to Brian Gu, the company’s president and honorary vice chairman. 

  • Tencent denied a report it was considering selling off some of their investments in companies from Meituan to Didi to bankroll share buybacks and new businesses.

  • Sea Limited is preparing to fire about 3% of Shopee employees in Indonesia, as one of the ways to curb ballooning losses.

  • DBS and UOB have temporarily removed their fixed rate home loans while they review the interest rates on these packages.
  • SATS is in negotiations with private equity owner, Cerberus Capital Management, regarding the acquisition of air cargo handler Worldwide Flight Services.

  • Digital Core REIT announced plans to acquire two data centres in Frankfurt and Dallas from its sponsor Digital Realty for a total acquisition cost of up to US$700 million (S$993 million).

  • Guocoland has sold around 84% of its Lentor Modern project’s 605 units over the first day launch with prices ranging from S$1856-2538 psf. 

Source: Bloomberg, CNBC, Business Times, Edge Singapore

THE BIG IMPORTANT STORY

4 ways to cope with the US Fed’s latest big rate hike

The Fed raised interest rates by another 0.75 percentage points, and is projecting that rates will be higher for longer. Here are a few ways we can cope with the rising interest rates.

4 ways to cope with with US Fed

WHAT’S UP THIS WEEK

Wednesday, 28 Sep 

  • SGX Academy webinar featuring Beansprout: SPACS - Addressing key investor questions Register here 

Thursday, 29 Sep 

  • Singapore: 6-month Treasury bill auction
  • US: Bed Bath & Beyond Inc, Micron earnings
  • US: GDP Growth data
  • SGX Academy webinar featuring Beansprout: How to ride on the structural growth of the Chinese EV sector Register here 

Friday, 30 Sep 

  • US: University of Michigan Inflation Expectation data

Get the full economic and Singapore earnings calendar on the SGX Academy

Source: SGX, Bloomberg, Refinitiv

THAT’S INTERESTING

  • No more waiting.  Gojek will shorten the grace period for cancellations to four minutes and introduce a waiting fee structure from Sep 26, following a similar move by Grab in July. A first waiting fee of S$3 will be charged if a driver has waited at the pick-up point for more than four minutes. Passengers will be charged another S$3 for every five additional minutes the driver has to wait thereafter. This will be capped at S$9 after 19 minutes of waiting. (Source: Channelnewsasia)

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