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Global Fundamental Analysis 20/09/2022

Global Fundamental Analysis 20/09/2022, FP Markets

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

U.S. stocks turned higher in the last hour of trading as investors focused on this week’s Federal Reserve meeting. Treasury yields continued to climb, led by the 2-year note, which is trading at a 15-year high. The WSJ Dollar Index edged up. Oil prices climbed and gold prices retreated, with Wednesday’s Fed decision in focus.

Australian Market

Australia’s S&P/ASX 200 closed 0.3% lower after a late selloff wiped out modest gains by the heavyweight materials and financial sectors. The materials and financial sectors both closed flat, while energy, health, tech and utilities gave up between 1.1% and 1.3%.

US Market 

Major U.S. stock indexes perked up as investors looked ahead to the Federal Reserve’s interest-rate decision and fretted about the health of the U.S. economy. The S&P 500 gained 0.7%, snapping a two-session losing streak. The Dow Jones Industrial Average advanced 0.6%, while the technology-focused Nasdaq Composite rose 0.8%. The indexes opened lower but swung into positive territory as the closing bell approached.

“We’re afraid that the Fed could surprise us with another jumbo hike,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. Last week’s corporate warnings, he said, suggested “we very well could be at the entry point of the U.S. recession.”

Commodities

Gold futures declined, giving back most of what they gained in the previous session, to hold ground near their lowest price since 2020, while the yield on the 10-year Treasury note climbed to its highest level in more than a decade. Gold futures for December delivery fell 0.3% to settle at $1,678.20 per ounce. Edward Moya, senior market analyst at Oanda, said gold appears to have run out of downside momentum as the selloff over the past week has returned the yellow metal to its weakest level in two years.

Another catalyst, such as a hawkish Fed on Wednesday, would likely be needed for gold prices to continue to soften. “The lead up to the FOMC meeting has been very bearish for gold. Gold is stabilizing here as selling pressure has exhausted itself and will likely need to wait for the FOMC decision,” Moya said.

Oil Futures

Oil prices finished higher, erasing early losses that had led the global crude benchmark to dip below $90 a barrel for the first time in more than a week. Investors fretted over tight supplies of oil and oil products and weighed prospects for demand, ahead of an expected decision by the Fed this week to deliver another jumbo rate hike. West Texas Intermediate crude for October delivery rose 0.7% to settle at $85.73 a barrel on the New York Mercantile Exchange.

The October contract expires at the end of Tuesday’s trading session. November Brent crude climbed 0.7% to settle at $92 a barrel on ICE Futures Europe. The market is “waking up to realize” that distillate supplies, which include heating oil, are so tight that there’s little room for any disruptions, ahead of the winter heating season, said Phil Flynn, senior market analyst at The Price Futures Group.

Forex

Major currencies eased against the US dollar in European and US trade. The Euro rose from near US$0.9967 to highs near US$1.0027 and was near session highs at the US close. The Aussie dollar rose from lows near US66.70 cents to highs near US67.28 cents and was near highs at the US close. And the Japanese yen rose from 143.62 yen per US dollar to JPY143.16 and was near JPY143.20 at the US close.

European Markets

European sharemarkets were mixed on Monday. The panEuropean STOXX 600 index lost 0.1% despite being down 1% for most of the session. Shares in Volkswagen rose by 1.1% as it saw a valuation of up to 75 billion euros (US$75.1 billion) for luxury sportscar maker Porsche, in what will be Germany’s second-largest initial public offering in history. Shares in Porsche Holding,
Volkswagen’s top shareholder, added 3.5%. The German Dax index rose by 0.5% but the French sharemarket fell by 0.3%. The UK market was closed for a public holiday.

Asian Markets

Earlier Monday, China stocks dropped, tracking widespread weakness in equities amid growing recession worries and rising interest rates. The benchmark Shanghai Composite Index slipped 0.3%, while the Shenzhen Composite Index gave back 0.8%. The tech-heavy ChiNext Price Index lost 0.7%. Software developers led the downturn, as the sector retreated from gains late last week.

Hong Kong’s Hang Seng Index fell 1.0% as sentiment toward China’s property sector remained subdued. Official data show that the overall disappointing trend in property-related activities continued in August, Nomura analysts said. Australia’s S&P/ASX 200 closed 0.3% lower after a late selloff wiped out modest gains by the heavyweight materials and financial sectors. The materials and financial sectors both closed flat, while energy, health, tech and utilities gave up between 1.1% and 1.3%.

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