Global Fundamental Analysis 26/10/2021

Global Fundamental Analysis 26/10/2021, FP Markets

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

U.S. stocks rose to kick off a week full of big tech earnings. The yield on the 10-year Treasury ticked lower to 1.63% after ticking lower earlier in the session. The WSJ Dollar Index edged higher to 88.11. U.S. oil prices ended the day flat despite mounting signs that demand will outstrip supply in the short term. Gold futures posted their highest finish in nearly six weeks.

Australian Market

Australia’s S&P/ASX 200 climbed 0.3%, with gains across almost every sector. Commodity stocks led the way and energy companies provided five of the ASX 200’s six best performing components. Industrial and tech stocks slipped amid disquiet over potential regulation of Australia’s buy-now-pay-later sector.

US Market

U.S. stocks rose, with the S&P 500 and Dow Jones Industrial Average closing at record highs. Stocks flitted between small gains and losses in early trading but were decisively higher by afternoon. The S&P 500 ticked up 0.5% as of 4 p.m. ET, and the Dow Jones Industrial Average advanced 0.2%. Both topped records hit last week.

The Nasdaq Composite Index added 0.9% as technology stocks gained to start the week. Strong earnings from banks, consumer companies and manufacturers have soothed investors’ concerns about higher inflation and labour shortages. Now all eyes are set on technology stocks, which have a weighting of nearly 30% in the S&P 500.

Facebook reported third-quarter results after markets closed. Microsoft, Twitter and Alphabet, Google’s parent company, are scheduled for Tuesday. Apple and Amazon.com are expected to report later in the week.

Commodities

Gold futures climbed above $1,800 an ounce, with concerns surrounding rising inflation helping prices mark their highest finish in more than six weeks. “Real interest rates are as low as they have been since the beginning of the pandemic, which is supportive of gold as rising inflation expectations are outpacing the rise in benchmark interest rates,” said Tyler Richey, co-editor at Sevens Report Research.  

“The trend higher in rates appears to be sustainable” but at some point, “inflation estimates should peak if price pressures are true to be transitory,” he said. “In that situation, gold would likely top out and roll over as the combination of upward trending interest rates and a stronger dollar offset lofty but steady inflation expectations.”Against that backdrop, December gold futures climbed 0.6% to settle at $1,806.80 an ounce, with prices for the most active contract ending at their highest since Sept. 14, according to FactSet data.

Oil Futures

Natural-gas futures rallied to mark their highest settlement in almost three weeks, with forecasts for colder weather lifting prices for the heating fuel by nearly 12% for the session. Oil futures, meanwhile, finished on a mixed note, with U.S. prices flat and global prices up for the session, as investors focused on tight supply and comments from oil producers in Saudi Arabia and Russia.  

November natural gas climbed 11.7% to settle at $5.898 per million British thermal units. That was the highest finish for a front-month contract since Oct. 5, according to Dow Jones Market Data. Also on Nymex, the U.S. and global benchmark crude futures split paths, with U.S. prices trading higher for much of the session, then moving lower – only to finish flat.  

“Such volatility is to be expected with crude testing key technical resistance levels and multiyear highs,” said Troy Vincent, market analyst at DTN. West Texas Intermediate crude for December delivery settled unchanged at $83.76 a barrel on the New York Mercantile Exchange after touching a high of $85.41. Based on the front-month contracts, prices touched their highest intraday level since October 2014.

WTI has seen nine consecutive weekly gains, based on front-month contracts – the longest streak ever for front-month contracts, according to data going back to 1983 compiled by Dow Jones Market Data. December Brent crude, the global benchmark, rose 0.5% to settle at $85.99 a barrel on ICE Futures Europe.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro fell from near US$1.1660 to US$1.1590 and was near US$1.1610 at the US close. The Aussie dollar eased from highs near US75.05 cents to lows near US74.75 cents and was near US74.90 cents at the US close. And the Japanese yen eased from 113.50 yen per US dollar to JPY113.88 and was near JPY113.65 at the US close.

European Markets

European sharemarkets rose on Monday with the focus on higher inflation rates and rising bond yields. Mining rose 1.8%, energy rose 1% and banks rose 0.8%. But telecom fell by 0.9%, industrials fell by 0.7% and utilities fell by 0.6%. Around 18% of STOXX 600 companies have issued profits and 63% have beaten analyst estimates compared with 52% in a typical quarter. The pan-European STOXX 600 index rose by 0.1%. The German Dax index rose by 0.4%. And the UK FTSE index gained 0.3%. In London trade shares in Rio Tinto rose by 2.0% and BHP rose by 2.8%.

Asian Markets

Earlier Monday, Chinese stocks advanced, with energy companies rising amid high energy-commodity prices while consumer-related companies fell. The Shanghai Composite Index rose 0.8%, the Shenzhen Composite Index gained 0.9% and the ChiNext Price Index climbed 1.6%. Consumer-related companies declined amid concerns over a resurgence of Covid-19 in 11 of China’s provinces, IG said.  

Hong Kong’s Hang Seng Index closed flat. Declines were led by consumer stocks. The market is likely to focus on the spate of third-quarter earnings due later in the week, KGI Securities said. Japan’s Nikkei Stock Average fell 0.7%, dragged by losses in tech and food stocks, as uncertainty continued about the pace of the economic recovery. Investors are focusing on political developments ahead of Japan’s lower-house election on Sunday.

 

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