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Global Fundamental Analysis 21/09/2022

Global Fundamental Analysis 21/09/2022, FP Markets

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

U.S. stocks slid ahead of Wednesday’s rate decision by the Federal Reserve, which is widely expected to deliver another 0.75 percentage-point increase. The yield on the 10-year Treasury climbed to 3.56%, breaching 3.5% for the first time since 2011. The WSJ Dollar Index gained to 101.9. Oil prices fell as investors appeared to bet that the Fed’s rate decision will be bearish for oil prices. Gold prices also settled lower.

Australian Market

Australia’s S&P/ASX 200 gained 1.3% amid strength in commodity and finance stocks. Lithium, iron-ore and gold shares all rose. Energy shares rose amid higher oil prices.

US Market 

Stocks fell on expectations the Federal Reserve will unveil more forceful monetary tightening to curb inflation this week. The S&P 500 lost 1.1% while the Dow Jones Industrial Average and Nasdaq Composite retreated 1%. Higher rates have pummeled markets in 2022, putting stock and bond prices into reverse after a multiyear run-up driven in part by low interest rates. Many investors are concerned that tighter central-bank policy, together with disruptions from Chinese Covid-19 lockdowns and the war in Ukraine, will push the U.S. economy into a recession next year.

Recently, downbeat corporate updates from big businesses such as FedEx and Ford Motor have added to the gloom. “The tone has definitely gotten a bit more pessimistic, and I do think we’re going to see more of that,” said Kristy Akullian, a senior strategist at BlackRock’s iShares Investment Strategy. Akullian said more of the asset manager’s clients have brought up shifting funds to bonds and away from stocks as bond yields rise.

Commodities

Gold prices declined, falling back to their lowest finish in more than two years, as investors wait for the Fed to raise interest rates and deliver updated economic projections on Wednesday. Gold futures for December delivery were off 0.4% to settle at $1,671.10 per ounce on Comex.

“It has been a rough month for the precious metal due to a stronger dollar and rising Treasury yields,” said Lukman Otunuga, manager, market analysis at FXTM. “After tumbling below the $1,700 psychological level last week, it feels like bears have won the battle in September.” However, “the war still rages on with various fundamental forces influencing gold prices,” he added.

Oil Futures

U.S. and global benchmark crude futures marked their lowest settlement prices in almost two weeks, as the Fed kicked off a two-day policy meeting that’s expected to result in another supersize rate increase that could eventually lead to a slowdown in energy demand. West Texas Intermediate crude for October delivery fell 1.5% to settle at $84.45 a barrel on the New York Mercantile Exchange on the contract’s expiration day, the lowest finish since Sept. 8, according to Dow Jones Market Data.

November Brent crude declined by 1.5% to $90.62 a barrel on ICE Futures Europe, also settling at its lowest since Sept. 8. “We continue to believe that the oil market is in the process of finding its footing,” said analysts at Sevens Report Research. “However, a hawkish Fed this week could further stoke fears of a hard landing and spur a continued rally in the dollar, which would surely see the recent lows near $80/barrel tested into the weekend,” they said.

Forex

Major currencies generally eased against the US dollar in European and US trade. The Euro fell from near US$1.0040 to lows near US$0.9950 and was near US$0.9975 at the US close. The Aussie dollar fell from near US67.30 cents to lows near US66.75 cents and was near US66.95 cents at the US close. And the Japanese yen fell from 143.28 yen per US dollar to JPY143.91 and was near JPY143.70 at the US close.

European Markets

European sharemarkets were weaker on Tuesday. The pan-European STOXX 600 index fell for a sixth straight session, down 1.1% to 11-week lows. Real estate stocks led falls in response to a surprise 100 basis point lift in rates by the Swedish Riksbank. US and UK central banks make rate decisions in the next few days. Also German producer prices rose at a record rate in monthly and annual terms in August. The German Dax index fell by 1.0%. The UK FTSE index fell by 0.6%. In London trade, shares in Rio Tinto fell by 0.9%, but BHP rose by 1.0%.

Asian Markets

China stocks recovered from days of losses amid weak regional equities performance and fears over a global recession. The benchmark Shanghai Composite Index rose 0.2%, its first gain in nearly a week. The Shenzhen Composite Index was up by 1.1% while the ChiNext Price Index added 0.7%. Electric-car makers, battery suppliers and battery-chemicals producers led the upturn, as the EV sector rebounded.

Hong Kong’s Hang Seng Index rose 1.2%, rebounding from a six-month low. The city’s top official said the government aims to reduce inconvenience to inbound travelers, further lifting hopes of pandemic rules being eased. Casino operators strengthened amid reports the central government is exploring measures that could support the tourism industry in Macau. Japanese stocks were led higher by gains in electronics and food stocks. The Nikkei Stock Average rose 0.4%.

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