Global Fundamental Analysis 24/06/2021

Global Fundamental Analysis 24/06/2021, FP Markets

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

U.S. stocks ended mixed, after trading in a thin band, with the Nasdaq Composite reaching another record high. The yield on the 10-year Treasury edged higher to 1.48%. The WSJ Dollar Index also edged higher, helping push gold prices lower after the close. Oil prices pared earlier gains but still managed to nudge higher after a bullish storage report. 

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Australian Market

Australia’s S&P/ASX 200 lost 0.6% as new Covid-19 restrictions were imposed on the country’s most populous city. Nearly every ASX sector lost ground amid restrictions aimed at containing Sydney’s latest virus outbreak. With school holidays days away, travel stocks were among the worst hit.

US Market

U.S. stocks traded in a narrow range, holding onto most of their gains from earlier in the week as the S&P 500 hovered just shy of its all-time high.  

The S&P 500 was down about 0.1%, while the Dow Jones Industrial Average slipped 0.2%. The tech-heavy Nasdaq Composite rose 0.1%, a day after it closed at a record.  

For much of this year, stocks have surged from their pandemic-induced lows, buoyed by a strengthening economy, supportive monetary policy and plentiful government spending.

The S&P 500 has gained about 90% since its closing low last March. With stocks trading near all-time highs, investors are struggling to discern the path forward.

Commodities

Gold futures climbed, with prices posting their highest settlement in a week, supported by a U.S. dollar that is receding from roughly two-month highs.  

Further clarity on the Federal Reserve’s “plans to taper asset purchases and ultimately raise benchmark interest rates” will be the main factor that determines if gold moves going forward, said Tyler Richey, co-editor of Sevens Report Research.  

“If the Fed stays accommodative and allows inflation to run a little over the target, gold can rally,” he said in a daily report. “But if they are seen as becoming too tight, then we are likely headed for new year-to-date lows.”

August gold futures rose 0.3% to settle at $1,783.40 an ounce, after touching a high of $1,795.60. Futures then ticked lower after the close.

Oil Futures

Oil futures rose, with front-month Brent prices settling above the key $75 mark, as U.S. crude supplies declined by nearly eight million barrels to mark their fifth weekly drop in a row.  

The string of crude-oil supply draws shows the strength of the U.S. economy but at the same time, reveals the “vulnerabilities of our lack of production,” said Phil Flynn, senior market analyst at The Price Futures Group.  

“We’re starting to see a supply squeeze,” and that’s “one of the reasons why we’re seeing the markets so strong,” said Mr. Flynn.  

On the first full session as a front-month contract, West Texas Intermediate crude for August delivery rose 0.3% to settle at $73.08 a barrel on the New York Mercantile Exchange.  

August Brent crude added 0.5% to $75.19 a barrel on ICE Futures Europe. Brent, based on the front month, climbed back to the highest settlement since October 2018.

Forex

Major currencies were mostly stronger against the US dollar in European and US trade. The Euro rose from lows near US$1.1880 to highs near US$1.1951 and was near US$1.1940 at the US close. The Aussie dollar rose from lows near US74.94 cents to highs near US75.63 cents and was near US75.55 cents at the US close. But the Japanese yen eased from near 110.34 yen per US dollar to
JPY110.78 and was near JPY110.65 at the US close.

European Markets

European sharemarkets rose on Tuesday. The pan-European STOXX 600 index lifted 0.3% with mining shares up 1.3% and chemical (+1.1%) stocks at record highs. The German Dax index rose
by 0.2% and the UK FTSE index gained 0.4%. In London trade, shares in Rio Tinto (+1.5%) and BHP (+1.3%) both lifted.

Asian Markets

Earlier Wednesday, Chinese stocks extended their winning streak that started last week. The benchmark Shanghai Composite Index rose 0.2%, the highest closing level in more than a week. The Shenzhen Composite Index added 0.8% while the ChiNext Price Index grew 1.1%, both extending gains for a fifth consecutive trading day. Electronics suppliers and home-appliance makers were among the top gainers.  

Hong Kong stocks also ended the session higher, recovering from two days of consecutive declines. The benchmark Hang Seng Index jumped 1.8%, notching its largest one-day percentage gain since April. Tech stocks led the upturn as the sector rebounded from steep losses in recent sessions.  

The Nikkei Stock Average was flat as losses in pharmaceutical and financial stocks helped offset gains for chip stocks. The broader market index Topix fell 0.5%.

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