Global Fundamental Analysis 02/08/2021

Global Fundamental Analysis 02/08/2021, FP Markets

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

Major U.S. stock indexes settled lower for the day and the week but ended July sharply higher. The yield on the 10-year Treasury slipped to 1.23%, ending July with the largest monthly decline since March 2020. The WSJ Dollar Index rose to 86.97. Oil prices edged higher but were kept in check by the prospect of new Covid restrictions. Gold prices slipped for the session but had both a strong week and month overall.

Australian Market

Australia’s S&P/ASX 200 lost 0.3% following a late sell-off. The benchmark bounced between narrow gains and losses for most of the session before dropping in the final hour. It ended flat for the week.

US Market

U.S. stocks drifted lower for the session, although major indexes held on to their gains for the month. The S&P 500 fell 0.5% in 4 p.m. trading. The Dow Jones Industrial Average declined 0.4% and the Nasdaq Composite slipped 0.7%.

A months-long rally in U.S. stocks has weakened in recent weeks on signs that the pace of economic growth may be slowing and snarls in the global supply chain for goods are persisting. Lingering concerns over China’s clampdown on its internet and technology businesses as well as lofty expectations for corporate earnings have also weighed on sentiment this week. Amazon.com’s disappointing sales report late Thursday and weaker outlook rattled Wall Street further, investors say.

Nevertheless, U.S. stock indexes posted gains for the month, led by gains in shares of utilities and real-estate companies. The bondlike stocks tend to pay hefty dividends to investors, making them look relatively attractive when markets are volatile. The S&P 500 is up 2.3% for July, its sixth consecutive month of gains, while the Dow industrials and the Nasdaq Composite are both up more than 1% each.

Commodities

Gold futures finished lower, capping a strong week and month for bullion that recently saw prices touch their highest levels in six weeks. “Inflation is accelerating while Treasury yields trend lower, resulting in record low negative yields,” which are bullish for gold, said Michael Armbruster, managing partner at Altavest. “It also helps gold that the dollar has rolled over yet again.”  

December gold futures, the most active contract, fell 1% to settle at $1,817.20 an ounce. A 1.7% surge on Thursday marked the highest settlement for the most active futures contract since June 16 and the largest one-day percentage gain since May 6. For the week, bullion based on the most-active contracts rose nearly 0.9% and scored a 2.6% monthly advance, it’s third such gain of the past four months, according to Dow Jones Market Data.

Oil Futures

Oil futures settled higher, shaking off earlier declines as tight U.S. crude supplies helped lift prices up for the fourth month in a row. Prices also ended higher for the week on the back of the “favourable supply and demand dynamics,” said Lukman Otunuga, manager, market analysis at FXTM. “As concerns over the Delta variant’s impact on global fuel demand ease, this could support oil bulls moving forward.”  

Last week’s decline in U.S. crude inventories, meanwhile, is also supportive for oil prices as it encourages the demand outlook, Mr Otunuga said. U.S. benchmark West Texas Intermediate crude for September delivery rose nearly 0.5% to settle at $73.95 a barrel on the New York Mercantile Exchange, the highest front-month finish since July 13, according to Dow Jones Market Data. Front-month prices logged a

2.6% weekly rise and a nearly 0.7% monthly climb. Global benchmark Brent crude saw its front-month September contract, which expired at the end of the session, rose 0.4% to end at $76.33 a barrel, around 3% higher for the week and up 1.6% for the month.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1910 to lows near US$1.1855 and was near US$1.1870 at the US close. The Aussie dollar fell from highs near US74.00 cents to lows near US73.30 cents and was near US73.45 cents at the US close. And the Japanese yen eased from near 109.48 yen per US dollar to JPY109.82 and was near JPY109.70 at the US close.

European Markets

European share markets were weaker on Friday. Fears about the economic impact of the delta variant and the regulatory crackdown in China offset positive earnings and economic reports. The euro-zone economy grew by 13.7% in the year to June (survey: +13.2%). The pan-European STOXX 600 index lost 0.5% but rose for the sixth straight month in July. The German Dax index fell by 0.6% and the UK FTSE fell by 0.7%. In London trade, shares in Rio Tinto fell by 2.9% and BHP shares fell by 1.9%.

Asian Markets

Earlier Friday, Chinese stocks ended the session mixed, weakening from sharp gains on Thursday. The benchmark Shanghai Composite Index fell 0.4%, while the Shenzhen Composite Index edged up 0.1%. The ChiNext Price Index shed 0.6% after the index on Thursday soared by its largest one-day gain in over two years. Consumer stocks such as food and beverage sellers and tourism agencies weighed on the market, while a rebound in steelmakers offset losses.  

Hong Kong’s Hang Seng Index fell 1.3%, following the previous day’s short-lived rebound. Property developers led the downturn, as many investors worried the real estate sector may be the next target of China’s stepped-up regulatory tightening. Japan’s Nikkei Stock Average closed 1.8% lower on concerns about expanded Covid-19 measures. Media reports said Japan could announce an expansion of state-of-emergency measures that are in place in Tokyo and Okinawa to more regions, owing to a recent surge in infections. Electronics stocks led to losses.

  • Global Fundamental Analysis 02/08/2021, FP Markets
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