Kaohoon Morning Brief – 7 July 2022

1) FSS expects sideways-up trends amid fluctuation in oil markets

Finansia Syrus Securities (FSS) expected SET Index to move in sideways to sideways-up trends within the range of 1,530-1,550 points. Even with the energy sector pressuring the market from plummeting oil prices, the analyst expected the overall outlook on buying power and lower energy cost for production will offset negative factors.

The analyst saw FOMC to continue hiking interest rates, resulting in rising Dollar Index, while 2-year bond yield hit 3% to create an inverted yield curve.


2) Oil prices continue to trade lower on fear of economic slowdown

Oil prices continued to move downward in the morning session of Asian trading hours on Thursday after Brent crude dropped below $100 mark for the first time since April 25 amid fears of recession from aggressive rate hike that could cause economic slowdown and dampen oil demand.

As of 9:43 local time on July 7, 2022, Brent crude fell 1.18% to trade at $99.50 per barrel, while the West Texas Intermediate (WTI) dropped 1.02% to trade at $97.52 per barrel.


3) Fed will be more restrictive on policy rate if inflation remains hot, minutes say

The U.S. Federal Reserve officials will likely be more restrictive on policy rates at the July meeting if inflation does not slow down, according to minutes released at their June’s meeting.

The market is now inclined to a 75 basis points hike at the July meeting and another 75bps in September before slowing down to 50bps in each meeting in November and December.


4) U.S. non-manufacturing purchasing fell to lowest level since May 2020

The U.S. non-manufacturing purchasing managers’ index (PMI), which indicates the overall economic condition for the non-manufacturing sector, dropped in June to the lowest level since May 2020, according to the data from the Institute for Supply Management (ISM)  on Wednesday.

The reading in June fell to 55.3%, down 0.6 percentage points from 55.9% in May. However, June’s reading was higher than expectations of 54.3%.