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Global Fundamental Analysis 01/08/2022

Global Fundamental Analysis 01/08/2022, FP Markets

Opening Call: The Australian share market is to open higher.

U.S. stocks gained, with the three main stock indexes notching their best month since The yield on the 10-year Treasury fell to 2.65%. The WSJ Dollar Index retreated to 97.66. U.S. oil prices posted their largest one-week percentage rise since early May.

Australian Market

 Australia’s S&P/ASX 200, however, gained 0.8%, with all sectors finishing in the green. Property trusts were the standout sector, closing 2.9% higher, followed by utilities, which gained 2.5%. For the month, the ASX200 gained 5.7%.

US Market 

Major stock indexes rose to end their best month since 2020, clawing back some of their losses from a dismal first half. The S&P 500 gained 9.1% in July, while the Dow Jones Industrial Average rose 6.7%, the strongest monthly showing for each index since November 2020. The tech-heavy Nasdaq Composite climbed 12% for its best month since April 2020.  

Investors have taken comfort in recent days from the idea that slowing economic growth might encourage the Federal Reserve to raise rates at a slower clip. They also have been encouraged by positive signals during earnings season, as expectations for quarterly profit growth rose over the past month.  

But money managers and strategists are also debating whether stocks can hold on to the recent gains in the face of continued monetary tightening and worrisome signals about the economy. Many are skeptical. “It seems like the market has prematurely declared victory over inflation,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. “It’s completely out of step with what the Fed and Chair Powell laid out this week.” On Friday, the S&P 500 rose 1.4%, while the Dow Jones Industrial Average added 1%. The Nasdaq Composite advanced 1.9%. All three gauges ended both the week and the month with gains.

Commodities

Gold futures finished higher, contributing to a gain for the week, as some traders expect the Federal Reserve to be “less aggressive” on interest-rate hikes, but prices for the precious metal still posted a loss for the month. The most-active December gold futues contract gained 0.7% to settle at $1,781.80 an ounce on Comex. Based on the most-active contract, gold gained nearly 3.2% for the week, but lost 1.4% for the month, according to Dow Jones Market Data.  

In July, gold bulls were “terrorized by expectations of very aggressive interest-rate hikes by the Federal Reserve, and almost all central banks, ” which led to a historical high in the U.S. dollar index and rising bond yields, said Chintan Karnani, director of research at Insignia Consultants. Gold logged a loss for the month.  

However, the price of the most-active gold contract has gained roughly $40 since Federal Reserve Chairman Jerome Powell spoke on Wednesday, Rupert Rowling, a market analyst at Kinesis, noted. He added that gold has benefited from the market’s interpretation that the Fed might not be as aggressive with its interest-rate hikes going forward.

Oil Futures

U.S.-based and international crude-oil futures settled higher, contributing to a gain for the week, but worries about a recession pulled prices lower for the month. Traders also awaited a decision on production levels by major producers, with the Organization of Petroleum Exporting Countries and their allies scheduled to meet next week.  

West Texas Intermediate Crude for September delivery gained 2.3% to settle at $98.62 a barrel on the New York Mercantile Exchange. Prices based on the front month ended 4.1% higher for the week, but down nearly 6.8% for the month, according to Dow Jones Market Data. Global benchmark September Brent crude rose 2.7% to end at $110.01 a barrel on ICE Futures Europe.

Front-month prices climbed 6.6% for the week and fell 4.2% for the month. “Ongoing fears of slowing economic growth continue to fuel the bearish sentiment, with the global commodity” negative month-to-date, said Lukman Otunuga, manager, market analysis, at FXTM.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro held between lows near US$1.0145 and highs near US$1.0250 and was near US$1.0218 at the US close. The Aussie dollar held between lows near US69.13 cents and highs near US70.30 cents and was near US69.85 cents at the US close. And the Japanese yen held between near 132.52 yen per US dollar and JPY134.55 and was near JPY133.20 at the US close.

European Markets

European sharemarkets rose on Friday in response to strong earnings and better-than-expected June quarter euro zone economic growth. The pan-European STOXX 600 index rose by 1.3%. The
German Dax index gained 1.5% and the UK FTSE index rose by 1.1%. In London trade, shares of Rio Tinto rose by 1.8% and BHP shares rose by 1.4%.

Asian Markets

Earlier Friday, Chinese shares declined, with the Shanghai Composite Index falling 0.9%. The Shenzhen Composite Index lost 1.0% and the ChiNext Price Index was 1.3% lower. Investors were relatively cautious in July, and corporate earnings should drive market divergence in August, China Galaxy Securities said.

Hong Kong’s Hang Seng Index dropped 2.3%, and lost 7.9% in July, dragged by a selloff in tech stocks amid tensions between China and the U.S. over Taiwan. Hang Seng Tech Index fell 4.9% Japan’s Nikkei Stock Average edged 0.05% lower, erasing its earlier gains as losses in regional equity markets and the yen’s marked strength weighed on the benchmark index.

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