Global Fundamental Analysis 10/09/2021

Global Fundamental Analysis 10/09/2021, FP Markets

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

U.S. stocks continued to decline as concerns over the spread of the Delta variant persisted. The yield on the 10-year Treasury slipped to 1.30%. The WSJ Dollar Index also fell, recently hitting 87.12. Oil prices finished lower after a whirlwind session. Gold prices ended a two-day skid.

Australian Market

Australia’s S&P/ASX 200 dropped 1.9%, as widespread losses pulled the benchmark to its worst one-day loss since February. The tech, telco, industrials, materials, energy and financial sectors all lost more than 2% as the index slumped to its lowest close since July 21. Tech stocks weighed heaviest and the heavyweight materials sector tumbled 2.1% amid weakening iron-ore prices. Only six ASX 200 component stocks finished higher.

US Market

U.S. stocks fell, as investors weighed declining jobless claims against continuing concerns about the threat of the Delta variant of the coronavirus. The S&P 500 shed 0.5%, while the Dow Jones Industrial Average lost 0.4%, in 4 p.m. trading, with both indexes finishing lower for a fourth consecutive session. The technology-heavy Nasdaq Composite fell 0.3%.  

Trading so far in September has been choppy, and major indexes have largely finished each session with small losses or gains. Money managers say that some of those moves have been driven by uncertainty surrounding the future pace of the U.S. economic recovery, especially with the continuing threat of rising Covid-19 cases and hospitalizations in many states.

Commodities

Gold futures climbed, after spending much of the session seesawing between gains and losses, as investors weighed a drop in weekly U.S. jobless claims to their lowest since the pandemic began and news that the European Central Bank will slow asset purchases.  

The precious metal’s “battle to retake $1,800 and hold it [is] not a sign of strength,” said Jeff Wright, chief investment officer at Wolfpack Capital. “Jobless claims and, more importantly, continuing jobless claims ticking down is a positive sign for labour markets,” he said, adding that the data did get some attention from the gold market.  

December gold futures tacked on 0.4% to settle at $1,800 an ounce, following declines in each of the two previous sessions. The yellow metal scored a slight haven bid late Wednesday after the release of the Federal Reserve’s Beige Book indicated that economic growth was slowing amid the spread of the Delta variant of Covid-19.

Oil Futures

Oil futures dropped, pressured by reports that China plans a release from its crude-oil reserve, in a move to ease commodity inflation. A slow post-hurricane recovery in the Gulf of Mexico energy output, however, raised expectations of larger drawdowns for U.S. petroleum supplies in the coming weeks, as the most recent data revealed a drop of more than 7 million barrels in gasoline inventories. 

There is a chance that the announcement by China was “backwards-looking” – meaning that the secretive nation may have already released oil from its petroleum reserve – so there may not be any “new” oil on the market, said Phil Flynn, senior market analyst at The Price Futures Group.  

West Texas Intermediate crude for October delivery fell 1.7% to settle at $68.14 a barrel on the New York Mercantile Exchange. November Brent crude, the global benchmark, declined by 1.6% to settle at $71.45 a barrel on ICE Futures Europe.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1840 to lows near US$1.1804 and was near US$1.1820 at the US close. The Aussie dollar rose from lows near US73.47 cents to highs near US73.93 cents and was near US73.65 cents at the US close. And the Japanese yen firmed from near 110.14 yen per US dollar to JPY109.61 and was near JPY109.75 at the US close.

European Markets

European sharemarkets were mixed on Thursday after the ECB announced plans to slow its emergency support but keep policy accommodative. The pan-European Stoxx 600 index fell by 0.1%, but the German Dax index edged higher by 0.1%. The UK FTSE index lost 1.0% with shares of easyJet down by 10.2%. London-listed shares in Rio Tinto (-2.7%) and BHP (-1.7%) both fell.

Asian Markets

Earlier Thursday, Chinese stocks advanced, as cyclical sectors continued their uptrend, led by steelmakers and coal miners. Soochow Securities said steelmakers’ profit margins have further to rise amid the peak season and potentially weaker supply. Coal prices, which aided China’s August producer prices rising at the fastest pace in 13 years, could remain elevated. The Shanghai Composite Index rose 0.5%, the second-highest closing this year.

The Shenzhen Composite Index and the ChiNext Price Index each added 0.1%. Hong Kong shares, however, retreated as video-game companies led to losses after Chinese regulators earlier told Tencent and NetEase to adhere to new online gaming industry rules. Reports of Beijing temporarily suspending approval for new online games in China also spooked investors. The benchmark Hang Seng Index ended 2.3% lower, while the Hang Seng Tech Index dropped 4.5%.

Japanese stocks also fell, dragged by declines in technology and pharmaceutical stocks, as profit-taking kicked in following the recent surge on hopes for an economic stimulus. The Nikkei Stock Average fell 0.6%. Investors are focusing on comments from candidates for a ruling-party chief, to be elected later this month.

  • Global Fundamental Analysis 10/09/2021, FP Markets
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