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Global Fundamental Analysis 24/01/2022

Global Fundamental Analysis 24/01/2022, FP Markets

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

U.S. stocks fell as the Nasdaq and S&P 500 finished their worst week since the pandemic onset. The yield on the 10-year Treasury note fell to 1.76%, compared with 1.83% on Thursday. The WSJ Dollar Index fell 0.05% to 89.47. Oil prices finished lower, but tallied their fifth straight weekly gain. And gold prices ended lower but clinched their second straight weekly gain.

Australian Market

Australia’s S&P/ASX 200 index closed 2.3% lower, with all sectors finishing in the red. The materials sector was the biggest loser, closing down 3.5%, while energy stocks fell 3.0%. The ASX 200 lost 3.0% over the week, its biggest weekly decline in around 14 months.

US Market

U.S. stocks fell for a third straight week, continuing their slide to start 2022, with investors worried about the prospect of higher interest rates and their effect on valuations. The Nasdaq Composite Index and S&P 500 finished their worst week since March 2020, when the spread of the Covid-19 pandemic in the U.S. spooked investors. The tech-heavy index fell 2.7% Friday and ended the week down 7.55%. The S&P 500 was down 5.7% for the week and down 1.9% on the day, while the Dow Jones Industrial Average slid 1.3% on the day and fell 4.6% on the week.  

“The (Federal Reserve) is saying ‘OK, zero interest rates don’t make sense here, so we’re going to move back toward something more reasonable, ‘” said Jonathan Golub, chief U.S. equity strategist and head of quantitative research at Credit Suisse. “They’re not really hikes, but signals that a big rate of change is coming. “The Nikkei Stock Average closed 0.9% lower, dragged by falls in electronics and auto stocks, as concerns persist about the Federal Reserve’s tightening pace.

Commodities

Gold futures ended lower, falling further away from the two-month highs hit earlier this week, but prices still registered a second week in a row of gains. February gold fell 0.6% to settle at $1,831.80 an ounce, after losing less than $1 Thursday. Still, the precious metal saw a weekly advance of 0.8%, after a rise of 1.1% the week before. “We could be in for some more choppy markets across the board,” said Jeff Wright, chief investment officer at Wolfpack Capital. “Gold will get good support, but also see rise in [that] same volatility.”

Oil Futures

Oil futures finished lower, down for a second session in a row from the more than seven-year highs set earlier in the week. The decline follows a rise in U.S. crude inventories that has weighed on overall sentiment. West Texas Intermediate crude for March delivery fell 0.5% to settle at $84.77 a barrel on the New York Mercantile Exchange, trimming the U.S. benchmark’s weekly advance to 2.2%, according to Dow Jones Market Data. March Brent crude, the global benchmark, lost nearly 0.6% at $87.89 a barrel on ICE Futures Europe, for a 2.1% weekly gain.  

“A surge in risk-off money flows in the back half of the week have caused oil futures to give back the bulk of this week’s gains,” said Tyler Richey, co-editor at Sevens Report Research. “Traders are becoming increasingly sensitive to rate-hike expectations and fears that the Federal Reserve could choke off the economic recovery.”

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro held between US$1.1320 and US$1.1360 and was near US$1.1340 at the US close. The Aussie dollar fell from highs near US72.13 cents to US71.70 cents and ended US trade near US71.85 cents. And the Japanese yen rose from near 114.00 yen per US dollar to JPY113.60 and was near JPY113.70 at the US close.

European Markets

European sharemarkets rose on Friday. The pan-European STOXX 600 index fell by 1.8% to be down 1.4% on the week – the third week of declines. The German Dax index lost 1.9% on Friday.
And the UK FTSE index fell by 1.2%. In London trade, shares in Rio Tinto fell by 2.2% after Serbia revoked its lithium exploration licenses. Shares in BHP fell by 3.2%.

Asian Markets

Chinese stocks closed lower for the third straight day, with broad losses in the pharmaceutical sector even though some drug makers rose, while oil & gas companies also weighed on the market. But coal miners and liquor makers rose. The Shanghai Composite Index dropped 0.9%, the Shenzhen Composite Index was 1.3% lower, and the ChiNext Price Index fell 1.0%.

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