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Global Fundamental Analysis 03/08/2022

Global Fundamental Analysis 03/08/2022, FP Markets

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

U.S. stocks slipped on China tensions and remarks from Federal Reserve officials. The yield on the 10-year Treasury note rose to 2.76% from 2.61% Monday. The WSJ Dollar Index rose 0.85% to 98.06. Oil prices ended slightly higher ahead of the OPEC+ meeting. And gold futures ended higher as safe-haven assets rose with U.S.-China tensions.

Australian Market

Australia’s S&P/ASX 200 index closed less than 0.1% higher as the country’s central bank raised interest rates and lowered its economic growth outlook. The Royal Bank of Australia raised the cash rate by 50 basis points. The heavyweight financial sector, whose component companies typically benefit from higher rates, added 0.8%. Consumer stocks rose and the tech sector put on 0.9%. Those gains were largely offset by weakness in commodity-related stocks. The energy sector fell 0.9% and materials lost 1.1%.

US Market 

U.S. stocks wavered as U.S. House Speaker Nancy Pelosi’s visit to Taiwan added to geopolitical tensons and Federal Reserve officials indicated that their fight against inflation was still going strong. The S&P 500 declined 0.7%. The Dow Jones Industrial Average dropped 1.2% while the technology-heavy Nasdaq Composite Index fell 0.2%. Pelosi’s visit came against a fragile backdrop for markets.

The U.S. economy is struggling with the twin threats of soaring inflation and rapidly rising interest rates-part of the Fed’s stated goal to fight rising prices even if it knocks economic growth. San Francisco Fed President Mary Daly said in an interview with CNBC that the Fed was “nowhere near” done increasing interest rates. Separately, Chicago Fed President Charles Evans expressed hope that the U.S. central bank could slow its pace of rate rises, but indicated that another 0.75-percentage-point hike in September “could also be OK.”

Commodities

Gold’s post-Federal Reserve rally continued, with the yellow metal and other safe-haven assets ending higher after U.S. House Speaker Nancy Pelosi landed in Taiwan, sparking vows of retaliation from Beijing. December gold futures climbed 0.1% to settle at $1,789.70 an ounce, booking a five-session rise and the longest win streak for the most-active contract since April 13, according to Dow Jones Market Data. Market focus also was on comments from two top Federal Reserve officials who said a central bank pivot away from aggressive rate-hiking plans wasn’t likely until high inflation subsides.

Oil Futures

Oil futures ended modestly higher, bouncing back from sharp losses the previous session as traders looked ahead to a meeting of the Organization of the Petroleum Exporting Countries and its allies. West Texas Intermediate crude for September delivery rose 0.6% to end at $94.42 a barrel on the New York Mercantile Exchange. October Brent crude, the global benchmark, rose 0.5%, settling at $100.54 a barrel on ICE Futures Europe.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0270 to around US$1.0170 and was near US$1.0166 at the US close. The Aussie
dollar held between US 69.15 cents and US69.65 cents and was near US69.20 cents at the US close. And the Japanese yen eased from near 130.65 yen per US dollar to JPY133.16 and was near the weakest levels at the US close.

European Markets

European sharemarkets eased on Tuesday as investors fretted about weaker global readings on factory activity. Tensions between the US and China over Taiwan also weighed on investor sentiment. Miners led the declines, down by 1.6%. But shares in BP rose 2.8% in response to positive profit figures. The pan-European STOXX 600 index fell by 0.3%. The German Dax index eased by 0.2% and the UK FTSE index fell by 0.1%. In London trade, shares of Rio Tinto fell by 1.3% and BHP shares fell by 1.4%.

Asian Markets

Earlier, in Asia, Japan’s Nikkei Stock Average ended 1.4% lower, dragged by sharp falls in machinery, energy and pharmaceutical stocks, as concerns continue about the economic outlook. Chinese stocks ended lower amid tensions between the U.S. and China over Pelosi’s planned visit to Taiwan. The benchmark Shanghai Composite Index slid 2.3%. The Shenzhen Composite fell 2.9% and the ChiNext Price Index slipped 2.0%. Energy stocks fell, weighed by weak economic data out of China.

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