Global Fundamental Analysis 12/05/2021

Global Fundamental Analysis 12/05/2021, FP Markets

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

U.S. stocks fell as energy led to a stock selloff and markets worried about inflation. The yield on the 10-year Treasury ticked higher to 1.62%, as gains were muted despite losses in equities. The WSJ Dollar Index slipped to 85.2. Oil prices climbed amid ongoing concerns about fuel shortages and other disruptions. The rise in Treasury yields sent gold prices lower.

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Australian Market

Australia’s S&P/ASX 200 closed 1.1% lower, retreating from its first record close since the onset of the Covid pandemic. Investors followed their U.S. counterparts, selling tech stocks, sending the sector 4.2% lower. The energy was the next worst performer, dropping 2.7% after gaining for five straight sessions.

US Market

Investors around the world retreated from stocks, with a selloff in technology companies spreading to other sectors as concerns about inflation spurred a return of volatility in the markets.

The Dow Jones Industrial Average tumbled 1.4%, as investors pulled back bets on financials, industrials and energy stocks. That gave the blue-chip index its steepest one-day decline since late February when worries about a sharp rise in bond yields blunted momentum in the stock market.  

Concerns about rising inflation have loomed over markets for much of this year as the U.S. economy has heated up, boosted, in part, by pent-up demand and government stimulus.

Fears about a sustained jump in inflation have weighed on growth stocks, including those in the tech sector, for much of the year, while cyclical shares have climbed higher on expectations of a full economic reopening.  

However, that trade has reversed, as stocks ranging from Home Depot to Chevron to American Express pulled back 2.6% or more, dragging the Dow down. Only two companies in the index of blue-chip stocks traded higher in the afternoon.  

Many technology stocks, in contrast, traded higher in the afternoon after falling sharply shortly after the morning bell. The Nasdaq Composite slipped 0.1%, cutting its losses after falling as much as 2.2% earlier in the day. The S&P 500 dropped 0.9%, also paring earlier losses.

Commodities

Gold prices marked their first loss in five sessions, with prices pulling back from their highest levels since February as a rise in U.S. Treasury yields dulled demand for the precious metal.  

However, the dollar is also “breaking down simultaneously,” so that may provide some support for gold, said Adam Koos, president of Libertas Wealth Management Group.  

June gold futures lost nearly 0.1% to settle at $1,836.10 an ounce, FactSet data show.

Oil Futures

Oil futures settled higher, with parts of the U.S. suffering from some fuel shortages as Colonial Pipeline works to restore the system that provides 45% of the fuel consumed on the U.S. East Coast by the end of the week.  

Crude prices had been seesawing between modest losses and gains during the session, pressured in part by the “realization that the pipeline won’t be closed for long,” said Matthew Parry, head of long-term analysis at Energy Aspects.  

West Texas Intermediate crude for June delivery rose nearly 0.6% to settle at $65.28 a barrel on the New York Mercantile Exchange. July Brent crude, the global benchmark, added 0.3% to settle at $68.55 a barrel on ICE Futures Europe.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro held between US$1.2125 and US$1.2180 and was near US$1.2145 at the US close. The Aussie dollar held between US78.20 cents and US78.55 cents and closed US trade near US78.40 cents. And the Japanese yen held between 108.35 yen per US dollar and JPY108.95 and was near JPY108.65 at the US close.

European Markets

European share markets fell on Tuesday with travel, retail and technology sectors driving the declines. Miners also gave back recent gains, down 1.5%. The pan-European STOXX 600 index lost 2% from record highs. The German Dax index fell by 1.8%. And the UK FTSE index fell by 2.5%. In London trade shares in Rio Tinto fell by 1.8% and shares in BHP lost 1.9%.

Asian Markets

Earlier Tuesday, Chinese stocks extended this week’s recovery after steep losses earlier this month, when investor sentiment weakened after the long holiday. The benchmark Shanghai Composite Index rose 0.4%, while the Shenzhen Composite Index climbed 0.4%. The ChiNext Price Index ended flat. Consumer services providers and F&B stocks led the gains.  

Hong Kong stocks dropped, as the tech sector continued weighing on the market. The benchmark Hang Seng Index fell 2.0%, while the Hang Seng TECH Index sank 3.0%. Chinese delivery giant Meituan slumped 5.3% amid concerns that the company’s founder tweeted something that could be viewed as critical of the government.  

The Nikkei Stock Average extended early losses to drop 3.1% amid uncertainty over the Covid-19 pandemic. Electronic stocks were among the worst performers, with pharmaceutical stocks also adding to losses.

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  • Global Fundamental Analysis 12/05/2021, FP Markets
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