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Global Fundamental Analysis 03/02/2023

Global Fundamental Analysis 03/02/2023, FP Markets

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

The Nasdaq Composite rose sharply and the S&P 500 gained on a surge in the communications-services sector, led by Meta. The yield on the 10-year Treasury ticked up to 3.4%. The WSJ Dollar Index advanced to 94.79. Oil prices dropped as U.S. inventories continued to climb. Gold prices settled lower after touching a nine-month intraday high.

Australian Market

Australia’s S&P/ASX 200 rose 0.1% as surging tech stocks pushed the index to a fresh nine-month high. The ASX 200 tech sector added 3.15%, its largest one-day gain since Nov 11. Health stocks rose again, helping offset losses by the heavyweight financial and materials sectors.

US Market 

The S&P 500 and Nasdaq Composite climbed, powered by big technology stocks, as the Federal Reserve’s decision to slow the pace of interest-rate hikes fueled investors’ hopes that the central bank could pivot to cutting rates later this year. The S&P 500 gained 1.5%, while the tech-focused Nasdaq Composite jumped nearly 3.3%. The Dow Jones Industrial Average was the laggard, slipping 0.1%.

After enduring last year the fastest pace of interest-rate increases since the 1980s, investors are now hopeful that the Fed has turned a corner. Derivatives markets show that many are betting that the central bank will begin cutting interest rates this year. In comments Wednesday, Fed Chairman Jerome Powell reiterated his previous stance that the fight against inflation isn’t over, and that officials will need to keep rates higher for longer.

Still, investors largely shook off those comments, extending a disconnect in recent months between the Fed’s messaging and the reaction of financial markets. “There was a risk that he more explicitly chastised financial markets and said, ‘Financial markets have made a mistake,'” said John Roe, head of multiasset funds at Legal & General Investment Management, referring to stocks’ strong rally this year. “It was almost like the absence of bad news was enough” to drive asset prices higher, he said.

Commodities

Gold prices settled with a loss after briefly touching a more than nine-month intraday high in the wake of the Fed’s latest rate hike. Prices for the precious metal were hit by what some analysts referred to as profit-taking and weighed down as the benchmark U.S. dollar index rebounded from earlier lows. Gold prices for April delivery slipped 0.6% to settle at $1,930.80 per ounce on Comex after trading as high as $1,975.20. Prices for a most-active contract hadn’t traded at an intraday level that high since April, FactSet data show.

Oil Futures

Oil futures declined to mark their lowest finish in more than three weeks, with global benchmark Brent prices down a fifth straight session. Prices for Brent, as well as U.S. benchmark West Texas Intermediate crude, fell more than 3%, when weekly data showed a sixth consecutive weekly build in U.S. crude inventories. West Texas Intermediate crude for March delivery fell 0.7% to settle at $75.88 a barrel on the New York Mercantile Exchange, according to Dow Jones Market Data.

April Brent crude gave back 0.8% to settle at $82.17 a barrel on ICE Futures Europe. “The big build in U.S. inventory data hung like an anvil around the market neck,” said Stephen Innes, managing partner at SPI Asset Management.

Forex

Major currencies were mostly weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1022 to lows near US$1.0885 and was near US$1.0910 at the US close. The Aussie dollar dipped from highs near US71.55 cents to lows near US70.69 cents and was near US70.80 at the US close. But the Japanese yen rose from near 129.08 yen per US dollar to around JPY128.09 and was near JPY128.65 at the US close.

European Markets

European sharemarkets closed higher on Thursday, hitting their highest level in nearly a year. In a statement, the ECB pledged to “stay the course in raising interest rates significantly at a steady
signalling that it intended to hike rates by another 50 basis points in March. Rate-sensitive real estate stocks were the top gainers, up 6.8%. The continent-wide FTSEurofirst 300 index gained 1.1%. Bank of England Governor Andrew Bailey said, “we’ve seen the first signs that inflation has turned the corner,” after hiking rates. In response, the UK FTSE 100 index rose 0.8%.

Asian Markets

 Earlier Thursday, Chinese shares ended mixed after a broadly positive start. Despite shares finishing on a mostly downbeat note, Stephen Innes, managing partner at SPI Asset Management, said investors remain optimistic toward the Chinese market in the longer run. The Shanghai Composite Index ended flat, the Shenzhen Composite Index dropped 0.1% and the ChiNext Price Index was 0.4% lower.

Hong Kong’s Hang Seng Index lost 0.5%, pulling back from early gains that came after Fed Chairman Powell’s comments that inflation has started to ease. Japan’s Nikkei Stock Average closed 0.2% higher, led by gains in electronics and tech stocks after the Fed slowed its pace of tightening.

  • Global Fundamental Analysis 03/02/2023, FP Markets
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