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Global Fundamental Analysis 12/01/2022

Global Fundamental Analysis 12/01/2022, FP Markets

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

U.S. stocks rose, with tech and energy leading the way, as Chairman Powell reiterated the Fed’s efforts to rein in inflation. The yield on the 10-year Treasury ticked lower to 1.74%. The WSJ Dollar Index slipped to 89.56. U.S. oil prices notched their largest one-day percentage gain since Dec. 6. Gold rose to its highest settlement in almost a week.

Australian Market

Australia’s S&P/ASX 200 retreated 0.8%, with losses in every sector. Consumer staples was the worst performing sector, slumping 2.1% after Inghams warned of lower production and sales due to Covid-driven staff absences. The heavyweight financial sector slipped 1.0%.

US Market

U.S. stocks rose, led by a rebound in shares of technology companies, as Federal Reserve Chairman Jerome Powell reiterated the central bank’s efforts to corral inflation. Stocks opened lower and dipped further as senators peppered Mr. Powell with questions during his reconfirmation hearing for a second term as Fed chair. Indexes later recovered.  

The S&P 500 added 0.9%, snapping a five-day losing streak. The Nasdaq Composite added 1.4%, building on Monday’s midday turnaround. The Dow Jones Industrial Average advanced 0.5%. During the hearing, Mr. Powell said the central bank plans to move as aggressively as needed to cool inflation. “If we have to raise interest rates more over time, we will,” he told lawmakers.

Commodities

Gold futures posted their highest finish in nearly a week, with comments from the Federal Reserve’s Jerome Powell doing little to sway expectations for higher inflation and volatility in financial markets. At his confirmation hearing for a second four-year term as chairman, Powell said the central bank’s plans to raise interest rates should not throw a wrench in the economy or damage the job market, essentially painting a picture of a “soft landing” rather than a recession.

“As spooked as all the markets have been by the Fed’s shift to more-hawkish rhetoric, I think Powell’s testimony served as reassurance that the central bank won’t move too drastically and will keep the health of the economy as its foremost priority,” said Brien Lundin, editor of Gold Newsletter.

February gold futures rose 1.1% to settle at $1,818.50 an ounce, with the most-active contract logging the highest settlement since Jan. 5. Gold also tallied a third consecutive settlement in positive territory – the longest string of gains since a seven-session stretch ended Nov. 12.

Oil Futures

Oil futures rose, with U.S. prices marking their highest finish in about two months, supported by tight supplies and growing expectations that the Omicron variant of the Covid-19 virus won’t derail global demand. The market theme is “about demand recovery rather than supply concerns, although both are supportive of oil prices,” said Manish Raj, chief financial officer at Velandera Energy Partners. Despite Omicron’s spread, “global oil demand remains robust among all modes of transportation.

” West Texas Intermediate crude for February delivery rose 3.8% to settle at $81.22 a barrel on the New York Mercantile Exchange. That was the highest front-month contract prices finish since Nov. 11, according to Dow Jones Market Data. March Brent crude, the global benchmark, rose 3.5% to $83.72 a barrel on ICE Futures Europe — the highest settlement since Nov. 9.  Both WTI and Brent have rallied nearly 8% so far in 2022.

Forex

Major currencies were mostly stronger against the US dollar in European and US trade. The Euro rose from lows near US$1.1314 to highs near US$1.1374 and was near US$1.1365 at the US close. The Aussie dollar lifted from lows near US71.55 cents to highs near US72.13 cents was near US72.10 cents at the US close. But the Japanese yen rose eased from near 115.12 yen per US dollar to JPY115.67 was near JPY115.30 at the US close.

European Markets

European sharemarkets closed higher on Tuesday. The panEuropean STOXX 600 index rose by 0.8% with technology stocks up 1.9% as investor fears over higher interest rates eased. The German
Dax index added 1.1% and the UK FTSE index gained 0.6%. In UK trade, shares in Rio Tinto (+1.9%) and BHP (+0.6%) both lifted.

Asian Markets

Earlier Tuesday, Chinese shares closed lower, weighed by auto and energy stocks. The Shanghai Composite Index lost 0.7%, the Shenzhen Composite Index fell 1.1% and the ChiNext Price Index declined 1.3%. “With China showing no signs of opening the stimulus floodgates, swirling virus nerves and property sector concerns, local markets are struggling to maintain any sort of upward momentum,” Oanda said. Auto stocks were among the worst performers amid Omicron worries.  

Hong Kong stocks ended the session little changed, as a rebound in Chinese property developers was offset by weakness in consumer stocks. The benchmark Hang Seng Index edged down 7.48 points, snapping a three-session rally. Chinese real-estate companies staged a slight recovery even as the sector’s uncertainties persist. Japanese stocks were dragged lower by electronics stocks, amid continued uncertainty about the Omicron variant and the Japanese government’s countermeasures. Concerns about reduction of polity stimulus from global central banks are also weighing on the market. The Nikkei Stock Average dropped 0.9%. The government said it would extend its near-total ban on foreigners entering the country until at least the end of February.

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