Kaohoon Morning Brief – 6 May 2022

1) BoE raises interest rate by 0.25bps to a full percentage point

The Bank of England’s policy makers voted 6-3 for the quarter-point rise from 0.75% to a full percentage point, its highest rate since 2009, in a move to tame surging inflation now heading above 10%.

The BoE said it was also worried about the impact of China’s COVID-19 lockdown policies which threaten to hit supply chains again and add to the inflation pressure.

The BoE’s move represented its fourth consecutive rate hike since December – the fastest increase in borrowing costs in 25 years – it signalled about further increases, despite its worries about a sharp economic slowdown.


2) European economy is stagnating, says ECB’s Panetta

European Central Bank’s Executive Board member Fabio Panetta said economic expansion has almost ground to halt and is expected to face further “high costs” as policy makers battle record inflation.

In the starkest warning yet from the ECB of the damage being wrought by the war in Ukraine, Panetta told Italy’s La Stampa newspaper that the region’s economy is “de facto stagnating.”


3) Credit Suisse cuts S&P 500 price target to 4,900

Credit Suisse said that it lowered the 2022 S&P 500 price target to 4,900 from 5,200, representing 13.9% upside from current levels, citing the impact of higher inflation and tighter monetary policy on the cost of capital.

The new target is based on a P/E of 19.2x from 20.4x. Meanwhile, the firm reiterated its 2022-23 EPS estimates of $235 and $255, implying 12.2% and 8.5% growth.


4) Nasdaq has its worst day since Sep 2020 after falling 5%

The Nasdaq 100 ended the session on May 5, 2022, down 5%, its worst day since September 2020 as the US 10-year yields jumped 10bps to 3.04%. Meanwhile, Dow Jones dropped 3.12% to 32,997.97 points, while S&P 500 fell 3.56%.