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Global Fundamental Analysis 15/07/2022

Global Fundamental Analysis 15/07/2022, FP Markets

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

U.S. stocks finished mostly lower after two major banks posted results that were short of expectations. The yield on the 10-year Treasury ticked up to 2.97%. The WSJ Dollar Index advanced to 100.28, pushing both gold and U.S. oil prices lower.

Australian Market

Australia’s S&P/ASX 200 gained 0.4%, as materials and energy stocks rose amid higher commodity prices. Shares of lithium and some gold miners also gained. Tech and consumer stocks also rose, but overall gains were pared by the financial and real-estate sectors.

US Market 

U.S. stocks pared early losses, but the S&P 500 still finished the session with its fifth consecutive down day as earnings reports from financial behemoths spotlighted concerns about the economic outlook. Stocks fell sharply after the open, then gradually climbed back. The S&P 500 dropped 0.3%. The blue-chip Dow Jones Industrial Average lost 0.5%, while the technology-heavy Nasdaq Composite Index edged up less than 0.1%.

The second-quarter earnings season ramped up with reports from JPMorgan Chase and Morgan Stanley. More results from the country’s top financial institutions are slated for Friday and Monday. With fears of a potential recession looming, investors are looking to what bank executives have to say about the state of the economy as much as their institutions’ balance sheets.  

“We’re starting to head into the heavy-duty earnings season and people are going to be combing through those earnings reports looking for any hint of softness or how companies are dealing with what they’re seeing in their own individual markets,” said Cheryl Smith, economist and portfolio manager at Trillium Asset Management.

Commodities

Gold prices slumped, with strength in the U.S. dollar contributing to the shiny metal’s drop to its lowest settlement in more than a year. Gold futures for August delivery fell 1.7% to settle at $1,705.80 per ounce after touching a $1,695 low. That marked the lowest finish for a most-active contract since March 30, 2021, FactSet data show.

Gold’s losses may offer an “excellent opportunity to be accumulating” the precious metal, said Peter Spina, president and chief executive officer at GoldSeek.com. “Just do not expect a run to record highs for gold just now,” he said. The metal can rally back up towards $1,900-$2,000 again, but “it is unlikely we see the gold price break out of this price range we have been stuck in until we see the Fed pivot its aggressive interest rate hikes,” Spina said.

Oil Futures

West Texas Intermediate oil fell 0.5% to finish at a three-month-low of $95.78 a barrel in a session driven by moves in the dollar and recession worries. Selling was intense early in the New York session as the dollar strengthened to above parity against the euro for the first time in almost two decades. That pushed WTI crude to a nearly five-month intraday low $90.56. But as the euro bounced off its lows to move back to slightly above parity versus the dollar, dollar-denominated prices for oil also moved back toward day-ago levels.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0047 to lows near US$0.9950 and was near US$1.0010 at the US close. The Aussie dollar fell from highs near US67.77 cents to lows near US66.81 cents and was near US67.45 cents at the US close. And the Japanese yen eased from near 138.36 yen per US dollar to JPY139.37 and was near JPY138.90 at the US close.

European Markets

European sharemarkets closed lower on Thursday. The panEuropean STOXX 600 index fell by 1.5% with basic resources shares down 3.8%. Italy’s FTSE MIB index sank 3.4% after Italian Prime Minister Mario Draghi resigned with his coalition government collapsing. The German Dax index slid 1.9% and the UK FTSE index shed 1.6%. In London trade, shares of Rio Tinto fell by 4.7% and BHP shares slipped 3.5%.

Asian Markets

Earlier Thursday, China stocks ended mostly higher. The benchmark Shanghai Composite Index inched 0.1% lower, the Shenzhen Composite Index gained 0.8% and the ChiNext Price Index advanced 2.6%. Sentiment was partly supported by recent data showing that China’s trade surplus in June surged to $97.94 billion, its highest on record, OCBC analysts said in a note.

Hong Kong’s benchmark Hang Seng Index lost 0.2%, extending a losing streak to the fourth session and hitting its lowest close in almost seven weeks. Property developers and banks weighed on the market, amid reports that home buyers across China have refused to pay mortgages for unfinished projects. The Nikkei Stock Average reversed early losses to close 0.6% higher, helped by gains in stocks of precision-instrument makers.

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