Kaohoon Morning Brief – 14 July 2022

1) FSS expected negative recession for SET Index, pressured by rising US inflation

Finansia Syrus Securities (FSS) expected SET Index to move in a negative territory in the range of 1,535-1,550 points, pressured by rising inflation rate in the U.S. that was higher-than-expected, which would result in an aggressive rate hike by the Fed later this month.

The Dollar Index remained at a higher level, while 2-year bond yields rose to 3.18% and 10-year bonds were muted at 2.94%, reflecting a wider inverted yield gap, fueling recession next year.


2) US high inflation in June could trigger aggressive rate hike and recession

The U.S. inflation accelerated at a faster-than-expected rate in June 2022, hitting 9.1% YoY and beating the estimate of 8.8% rise.

In the meantime, core inflation, which excludes food and energy prices, dropped to 5.9% YoY in June, but still higher than expectations of 5.7%.

The inflation that is running higher-than-expected could trigger an aggressive rate hike by the central bank, which might lead to a recession next year.

Nomura now expects a 100bps hike in July’s meeting.


3) US oil inventories unexpectedly rose last week

U.S. crude oil inventories unexpectedly rose 3.254 million barrels against expectations for a draw of 0.154 million barrels for the week ended July 8, according to the report of the Energy Information Administration.

U.S. crude oil inventories also rose 8 million barrels in the prior week.

Distillate stocks showed a 2.668 million-barrel build vs. a build of 1.591 million barrels expected.

Brent crude rose 0.16% to $99.73 per barrel in the morning session of Asian trading hours on Thursday. West Texas Intermediate (WTI) rose 0.06% to $96.36 per barrel.


4) Canada raises interest rate by a full point to tackle 40-year high inflation rate

Canada’s central bank on Wednesday raised its policy rate by a full point to 2.5% from 1.5%, the biggest increase since 1998 and the highest level since 2008. The move came after the Consumer Price Index in Canada rose by 7.7% to the highest level in 40 years.

The central bank expects inflation to remain around 8% in the next few months.