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Global Fundamental Analysis 18/08/2022

Global Fundamental Analysis 18/08/2022, FP Markets

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

U.S. stocks fell as Federal Reserve minutes showed officials agreed last month that they need to keep raising rates enough to slow the economy and will likely hold them there until inflation is clearly decelerating. The yield on the 10-year Treasury climbed to 2.90%. The WSJ Dollar Index advanced to 98.35, helping push gold prices lower. Oil prices rose after data showed a large drop in inventories of crude oil and gasoline.

Australian Market

Australia’s S&P/ASX 200 increased 0.3%, notching a third consecutive gain amid strength in consumer stocks. The consumer-discretionaries sector rose 1.4%, the materials sector gained 0.5%, while the healthcare sector lost 0.8%.

US Market 

U.S. stocks pared their losses as investors reviewed another batch of earnings from retailers and parsed minutes from the Federal Reserve’s July meeting for signals about future interest-rate moves. The major indexes trimmed their losses as investors perceived a dovish tint in the Fed’s jottings. The S&P 500 was down 0.7%, the Dow Jones Industrial Average lost 0.5% and the Nasdaq Composite declined 1.3%.  

“In a microcosm, today tells you how closely the market is looking for any indication of the Fed’s next step,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. After the minutes’ release, “everyone came back to the other side of the boat. That tells you what the market is focused on right now,” Mr. Baird said.

Commodities

Gold weakened for a third straight day, as a strong U.S. dollar and rising Treasury yields pushed prices to their lowest price settlement in two weeks. Prices for the precious metal then moved up in electronic trading shortly after the release of minutes from the Fed’s July monetary policy meeting.  

December gold futures were down 0.7% to settle at $1,776.70 per ounce on Comex. Jim Wyckoff, a senior analyst at Kitco, attributed the pullback in gold and silver this week to two primary factors: weak economic data out of China, and a rebound in the U.S. dollar and Treasury yields.

Oil Futures

Oil futures finished higher for the first time in four sessions, as U.S. government data revealed a more than seven million-barrel weekly drop in domestic supplies. The inventory data helped offset concerns over the global economic growth outlook, as traders continued to eye developments surrounding the Iran nuclear deal. West Texas Intermediate crude for September delivery rose 1.8% to settle at $88.11 a barrel on the New York Mercantile Exchange. October Brent crude climbed 1.4% at $93.65 a barrel on ICE Futures Europe.

“The biggest question hanging over the market this week is whether a new Iranian nuclear deal could be agreed to by U.S. and Iranian leadership after months of talks that had appeared to offer little progress,” said Robbie Fraser, manager, global research & analytics at Schneider Electric.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.0145 to highs near US$1.0202 and was near US$1.0175 at the US close. But the
Aussie dollar fell from highs near US70.25 cents to lows near US69.10 cents and was near US69.35 cents at the US close. And the Japanese yen eased from 134.11 yen per US dollar to JPY135.49 and was near JPY135.07 at the US close.

European Markets

European sharemarkets closed lower on Wednesday while bond yields rose after data showed that UK inflation hit 10.1% in July, the highest in 40 years. Investors fear that global interest rates will need to keep rising to control inflation. The pan-European STOXX 600 index fell by 0.9%. The German Dax index lost 2.0% on news that 20 ships are stuck in traffic on the Rhine after a vessel’s engine failure closed part of the waterway. The Rhine is Germany’s main commercial artery. The UK FTSE index fell by 0.3%. In London trade, shares of Rio Tinto and BHP shares both fell by 0.6%.

Asian Markets

Earlier Wednesday, Chinese shares ended higher as market sentiment improved amid expectations that the government will roll out more support for the ailing economy. Chinese Premier Li Keqiang has promised more fiscal support via government-bond issuance and has asked local officials from six provinces to adopt more pro-growth measures. The benchmark Shanghai Composite Index rose 0.4%, the Shenzhen Composite added 0.7% and the ChiNext Price Index advanced 1.7%.  

Hong Kong’s Hang Seng Index gained 0.5%, supported by tech stocks and Chinese oil majors. The tech sector was pulled higher by heavyweight component Meituan after reports that Tencent currently has no plans to sell its stake in the company. The Nikkei Stock Average ended 1.2% higher, closing above the 29000 mark for the first time since Jan. 5, as concerns recede about costs of fuel and raw materials.

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