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Global Fundamental Analysis 16/08/2022

Global Fundamental Analysis 16/08/2022, FP Markets

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

U.S. stocks bounced back to finish higher despite worries over data showing China’s economy stumbled in July. The yield on the 10-year Treasury fell to 2.79%. The WSJ Dollar Index expanded to 97.97, pushing gold prices lower. Oil prices reversed nearly all of last week’s gains in just one day on demand worries.

Australian Market

Australia’s S&P/ASX 200 rose 0.5% despite a mixed reaction to company earnings reports. The benchmark index was led higher by gains in materials, tech and retail discretionary stocks. Shares of lithium miners shone as the materials sector put on 0.8%, while software and service providers helped the tech sector rise 1.3%.

US Market 

U.S. stocks extended their recent winning streak, while commodity prices fell on worries about slowing growth in China. The S&P 500 added 0.4% after capping a fourth consecutive week of gains. The Dow Jones Industrial Average added 0.5% and the Nasdaq Composite advanced 0.6%. Signs that inflation in the U.S. peaked earlier this summer have investors hoping the Federal Reserve will raise rates at a slower pace starting in September.  

Some investors say stocks have fallen far enough this year to become attractive buying opportunities again. “When the S&P 500 falls, there’s a knot in your stomach, but when you’re scared-that’s the right time to be buying,” said Peter Boockvar, chief investment adviser of Bleakley Financial Group, who is buying quality value stocks.

Commodities

Gold futures dipped below $1,800 an ounce on Monday to settle at their lowest price in more than a week amid a broader pullback in commodity prices as the U.S. dollar advanced. December gold futures fell by $17.40, or 1%, to settle at $1,798.10 an ounce on Comex. Prices for the most-active contract settled at their lowest since Aug. 5, according to FactSet data.

Some analysts blamed the sour mood in gold on weak economic data out of China, along with surprise interest-rate cuts from the country’s central bank. Meanwhile, Marc Chandler, chief market strategist at Bannockburn Global Forex, blamed the pullback in gold on the renewed strength in the U.S. dollar.

Oil Futures

Oil futures settled with a loss of around 3% as weak economic data from China raised fears that a slowing global economy will reduce demand for energy products. Prospects for the revival of the Iran nuclear deal, which could lead to more global crude supplies, also contributed to losses for oil. West Texas Intermediate crude for September delivery fell 2.9% to settle at $89.41 a barrel on the New York Mercantile Exchange. October Brent crude dropped 3.1% to $95.10 a barrel on ICE Futures Europe.  

“Chinese economic data revealed the ongoing impact of Covid-19 lockdowns and an escalating property crisis…In response, China’s central bank unexpectedly cut key lending rates overnight in an effort to stimulate activity, which removed some of the pain resulting from the releases,” said Richard Hunter, head of markets at Interactive Investor.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.0255 to lows near US$1.0155 and was near US$1.0160 at the US close. The Aussie dollar fell from near US70.85 cents to US70.10 cents and was near US70.25 cents at the US close. The Japanese yen lifted from near 133.52 yen per US dollar to JPY132.56 but was back near JPY133.30 at the US close.

European Markets

European sharemarkets closed higher on Monday. Weak Chinese economic data saw investors drift to defensive stocks. The food & beverages sector rose 1.1% and healthcare and utilities rose by 0.8%. But miners fell 1.6% and the oil sector lost 1.3%. Also data showed that German wholesale prices fell by 0.4% in July, the first decline since Oct. 2020. The pan-European STOXX 600 index rose by 0.3%. The German Dax index rose by 0.2% and the UK FTSE index rose by 0.1%. But in London trade, shares of Rio Tinto fell by 2.2% while BHP shares fell by 0.8%.

Asian Markets

Earlier Tuesday, Chinese shares ended mostly higher after the PBOC unexpectedly cut two key interest rates to provide more support to the cooling economy. Data on China’s July economic activity missed consensus forecasts amid strains in the property market and Covid-19 clusters in the country, said Jing Liu, HSBC’s chief economist of Greater China. The Shanghai Composite Index was flat, while the Shenzhen Composite Index gained 0.5%.

The ChiNext Price Index added 1.0%. Hong Kong’s Hang Seng Index lost 0.7%, after the latest Chinese data showed economic activity slowed across the board in July. Among top losers were companies that said they would voluntarily delist from the NYSE. Japanese stocks climbed, led by gains in tech stocks, as concerns ease somewhat about fuel and borrowing costs. The Nikkei Stock Average rose 1.1%. As the earnings season winds down, investors’ focus is back to the war in Ukraine, geopolitical tensions around Taiwan and their implication for global trade.

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