Global Fundamental Analysis 15/04/2021

Global Fundamental Analysis 15/04/2021, FP Markets

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

U.S. stocks finished a volatile day mostly lower after a report from the U.S. Federal Reserve pointed to an accelerating U.S. economy and rising prices. That sentiment lifted the yield on the 10-year Treasury to 1.63%. The WSJ Dollar Index slipped to 86.52. Oil prices surged after forecasters predicted even stronger demand and U.S. oil inventories fell more than expected. Gold prices ticked lower amid higher Treasury yields, then moved lower still after the Fed’s report.

Australian Market

Australia’s S&P/ASX 200 closed 0.7% higher, recovering from a mid-session stumble to finish above 7000 points for the first time since February 2020. Tech, health and materials stocks led gains to help the benchmark to within 1.9% of its record close.

US Market

Investors sold tech stocks, knocking some major stock indexes lower after reaching all-time highs earlier in the day, as volatility continued to reverberate across the market.  

The Dow Jones Industrial Average opened higher after several banks kicked off the latest earnings-reporting season with blowout profit reports. But the blue-chip index gave up a significant chunk of the gain as the day wore on, much of it evaporating after the release of a Federal Reserve report saying the U.S. economy accelerated to a moderate pace and showed signs that businesses were raising prices between February and early April.  

The Dow Industrials settled 0.2% higher, falling short of a new closing record. The S&P 500, which also hit its highest level ever earlier in the session, slid into the red, shedding 0.4%. And the Nasdaq Composite fell further, declining 1%.

Commodities

Gold futures settled lower, pressured by a rise in U.S. Treasury yields, but showed little reaction to the latest comments on monetary policy and the outlook for the economy from Federal Reserve Chairman Jerome Powell.  

Prices then moved lower after the central bank’s Beige Book report showed a moderate acceleration in the economy.  

At the Economic Club of Washington, Mr Powell said the Fed would taper asset purchases well before any interest rate increase, but offered no date for a shift in policy.  

Against that backdrop, June gold futures fell nearly 0.7% to settle at $1,736.30 an ounce on Comex.  

Gold prices then moved lower in electronic trading to $1,735.20 shortly after the Fed Beige Book release.

Oil Futures

Oil futures ended sharply higher, as the International Energy Agency lifted its demand outlook for crude and a U.S. government report revealed a third drop in weekly inventories, prompting prices to post their highest finish since mid-March.  

In its monthly report, the International Energy Agency raised its forecast for global oil demand in 2021 by 230,000 barrels a day from its previous forecast. It now sees an increase of 5.7 million barrels a day from 2020 to 96.7 million barrels a day this year. 

West Texas Intermediate crude for May delivery rose 4.9% to settle at $63.15 a barrel on the New York Mercantile Exchange.  

Global benchmark June Brent crude picked up 4.6% to settle at $66.58 a barrel on ICE Futures Europe.  

Both WTI and Brent crude prices tallied their highest front-month contract settlements since March 17, FactSet data show.

Forex

Major currencies were stronger against the US dollar in European and US trade. The Euro rose from lows near US$1.1950 to highs near US$1.1985 and was near US$1.1980 at the US close. The
The Aussie dollar rose from lows near US76.70 cents to highs near US77.35 cents and was near US77.25 cents at the US close. And the Japanese yen held between 108.81 yen per US dollar and JPY109.07 and was near JPY108.90 at the US close.

European Markets

European share markets edged higher on Wednesday in response to upbeat earnings from software firm SAP and French luxury goods maker LVMH. The pan-European STOXX 600 index rose by 0.2%. The UK FTSE index rose by 0.7%. But the German Dax fell by 0.2% after the country’s economic institutes cut the 2021 GDP forecast. In London trade, shares in Rio Tinto rose by 2.6% with shares in BHP up by 3.3%.

Asian Markets

Earlier Wednesday, Chinese stocks finished higher, recovering from broad losses in recent weeks as a strong performance in U.S. equities helped set an upbeat tone in most Asian markets. The benchmark Shanghai Composite Index gained 0.6%, snapping a three-session losing streak. The Shenzhen Composite Index rose 1.4%, while the ChiNext Price Index jumped 2.2%. Consumer-services providers, such as tourism and education firms, led the upturn, while steelmakers also rose amid optimism for steel prices.  

Hong Kong stocks settled higher for the second consecutive session. The benchmark Hang Seng Index rose 1.4%, its largest one-day gain since late March. Chinese tech giants led the upturn, as the sector recovered from earlier losses amid concerns over regulatory uncertainties.  

The Nikkei Stock Average, however, dropped 0.4%, dragged by falls in fibre, metal and financial stocks, due partly to continuing concerns about the prolonged Covid-19 pandemic. Progress of Covid-19 vaccinations and any changes to other countermeasures will be closely watched.

  • Global Fundamental Analysis 15/04/2021, FP Markets
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