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  5. Global Fundamental Analysis 10/08/2022

Global Fundamental Analysis 10/08/2022

Global Fundamental Analysis 10/08/2022, FP Markets

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

U.S. stocks fell as investors took in the latest corporate earnings reports. The yield on the 10-year Treasury climbed before slipping in after-hours trade to 2.78%. The WSJ Dollar Index was roughly flat in a holding pattern ahead of CPI data due Wednesday, giving gold prices room to advance. Oil prices slipped ahead of inventory data.

Australian Market

Australia’s S&P/ASX 200, however, gained 0.1% despite weakness in large-cap stocks. An index of the 20 largest companies by market capitalization dropped 0.3% as the financial sector shed 0.8%. The materials and energy sectors each edged just 0.1% higher, leaving communications, tech and consumer discretionary stocks to make the major gains.

US Market 

U.S. stock indexes were lower as investors monitored earnings reports and economic data ahead of inflation figures. The S&P 500 slipped 0.4%, a day after the broad index finished with modest losses. The Dow Jones Industrial Average slid 0.2% while the technology-heavy Nasdaq Composite fell 1.2%.  

Investors await consumer-price data on Wednesday that could set expectations for how the Federal Reserve will approach monetary policy at its coming meetings. “The market has enjoyed a risk-on environment since the lows of mid-June, and investors interpreted Chair [Jerome] Powell as more dovish than he had hoped at the last Federal Reserve meeting,” said Quincy Krosby, chief global strategist for LPL Financial.

“But today’s market is tomorrow’s market-Wednesday’s inflation data will provide a clearer picture as to whether this bear market is truly behind us.” According to Ms. Krosby, inflation is the No. 1 concern for the market, including not only whether it is subsiding, but how quickly.

Commodities

Gold futures closed at their highest level in six weeks ahead of Wednesday’s U.S. consumer-price index update for July. Gold futures expiring in December rose 0.4% to end at $1,812.30, the highest level for the most-active contract since June 29, according to FactSet data. “Gold is getting a boost today from both safe-haven flows as stocks weaken and the dollar softens,” wrote Edward Moya, senior market analyst at Oanda. “If inflation eases a little more than expected, gold could make a run towards the $1,850 region.”

Oil Futures

Oil futures ended slightly lower, unable to maintain gains seen after Russia halted crude flows along the Druzhba pipeline toward Hungary, the Czech Republic and Slovakia. West Texas Intermediate crude for September delivery fell 0.3% to close at $90.50 a barrel on the New York Mercantile Exchange. October Brent crude lost 0.4%, to settle at $96.31 a barrel on ICE Futures Europe.  

Oil was lifted in early trade after Russia suspended crude flows through the Druzhba pipeline toward Hungary, the Czech Republic and Slovakia after sanctions prevented payment of a transit fee, Bloomberg reported. Druzhba is the world’s longest pipeline network. But upside was limited after the European Union presented on Monday what it described as its final text for restoring the 2015 nuclear accord with Iran, signaling it was up to Tehran to take or leave it.

Iranian officials have said they delivered an initial response to the draft and would make further points at a later date, news reports said. Optimism remains over a potential deal, which “could see Iranian crude supply flood the market, which would be welcomed by importers who stepped away from Russian supplies due to the war in Ukraine,” said Mihir Kapadia, chief executive of Sun Global Investments.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0245 to around US$1.0200 and was near US$1.0210 at the US close. The Aussie
dollar fell from near US69.93 cents to US69.50 cents and was near US69.60 cents at the US close. And the Japanese yen eased from near 134.72 yen per US dollar to JPY135.20 and was near JPY135.10 at the US close.

European Markets

European sharemarkets generally fell on Tuesday as investors awaited key US inflation data. Technology shares fell most, down 3.3%. Autos lost 2.2% and miners fell 0.5%. But banks rose 0.1%.
Companies generally lost ground after releasing earnings results with Germany’s Continental down 6.5%. The pan-European STOXX 600 index fell by 0.7%. The German Dax index lost 1.1%. But the UK FTSE index rose by 0.1%. In London trade, shares of Rio Tinto rose by 0.6% but BHP shares fell by 0.8%.

Asian Markets

Earlier Tuesday, Chinese shares rose, supported by coal miners and renewable-energy sectors, while pharma stocks weighed. The Shanghai Composite Index gained 0.3%, extending a winning streak to the fourth session. Coal miners have advanced this week as domestic demand stabilized and the EU’s import ban on Russian coal is set to begin, which could give global coal prices a lift, Guotai Junan Securities said. The Shenzhen Composite Index added 0.2% and the ChiNext Price Index was 0.7% higher.  

Hong Kong’s Hang Seng Index fell 0.2% as tech stocks continued to trend down and auto makers fell despite strong sales data. Investors are staying on the sidelines amid the heightened geopolitical friction, KGI Securities said. Japan’s Nikkei Stock Average lost 0.9% amid ongoing inflation worries. Main focus is very much on the U.S. CPI report due out Wednesday, said Michael Hewson, chief market analyst at CMC Markets.

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