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Global Fundamental Analysis 27/09/2022

Global Fundamental Analysis 27/09/2022, FP Markets

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

U.S. stocks closed lower, with the Dow Industrials sliding into a bear market. The yield on the 10-year Treasury rose to 3.93%, its highest since 2010. The WSJ Dollar Index rose 0.92% to 105.12. U.S. oil futures ended lower in volatile trade. And gold futures settled at a 2 1/2-year low.

Australian Market

Australia’s S&P/ASX 200 index closed 1.6% lower, weighed by sharp falls in mining and energy shares as commodity prices declined. Investors sold off those stocks amid rising concern over the global economic outlook, sparked by fears that policy tightening by the Federal Reserve and other central banks may lead to a global recession.

US Market 

The Dow industrials slid into a bear market — a decline reflecting investor concern about the pace of global growth and the price of central-bank efforts to slow inflation. The Dow Jones Industrial Average’s decline of 1.1% was its fifth down trading day in a row. The move put the Dow into its first bear market — defined in Wall Street parlance as a drop of 20% or more from a recent high — since the early days of the pandemic.

The S&P 500 fell 1%, hitting a new 2022 low. The Nasdaq Composite Index, which flitted between gains and losses, slipped 0.6%. Investors and analysts said sentiment continued to be negative as traders worry about the outlook for interest rates and the possibility that stress from the second extended period of declines this year will spill over into unexpected areas.

Commodities

Gold futures fell for a second straight session to settle at its lowest price in almost two-and-a-half years, as the 10-year Treasury yield climbed to its highest level since 2010, and the dollar advanced to fresh 20-year highs. December gold fell 1.3%, to settle at $1,633.40 per ounce on Comex after trading as low as $1,628.50.

Prices for the most-active contract finished the session at their lowest since April 1, 2020, FactSet data show. “Rising government bond yields and a soaring U.S. dollar index are the main bearish elements driving the precious metals markets south,” said Kitco Senior Analyst Jim Wyckoff, in a note to clients.

Oil Futures

Oil futures ended lower in volatile trading as fears of a recession saw prices fall to their lowest since January. West Texas Intermediate crude for November delivery fell 2.6% to settle at $76.71 a barrel on the New York Mercantile Exchange, marking the lowest front-month contract finish since Jan. 3, according to Dow Jones Market Data.

November Brent crude, the global benchmark, was down 2.4%, at $84.06 a barrel on ICE Futures Europe. After initially moving higher in U.S. trading hours as the U.S. dollar pared overnight gains, the afternoon trading session saw the dollar “claw back most of those gains and crude prices fall accordingly,” said Troy Vincent, senior market analyst at DTN.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$0.9699 to lows near US$0.9599 and was near US$0.9610 at the US close. The Aussie dollar dipped from highs near US65.31 cents to lows near US64.38 cents and was near US64.55 cents at the US close. And the Japanese yen fell from near 143.58 yen per US dollar to JPY144.78 and was near JPY144.65 at the US close.

European Markets

European sharemarkets were mixed on Monday. The panEuropean STOXX 600 index fell by 0.4%. Italy’s FTSE MIB index rose by 0.7% after the centre-right coalition led by Georgia Meloni won a clear majority in both houses of parliament. Germany’s Dax index slid 0.5% after German business sentiment fell further in September. The Ifo index dropped to 84.3 from 88.6 in August (survey: 87). The UK FTSE 100 index was flat but the UK FTSE 250 mid-cap index dropped 1.4% to near 2-year lows after the British pound fell to a record low against the greenback.

Asian Markets

Earlier, in Asia, Japan’s Nikkei Stock Average ended 2.7% lower, dragged by sharp declines in auto and energy stocks, as concerns persisted over policy tightening by major central banks and the economic outlook. Chinese stocks ended mixed amid worries over the government’s prolonged zero-Covid policy. The benchmark Shanghai Composite Index fell 1.2%, the Shenzhen Composite Index slipped 0.7%, and the ChiNext Price Index gained 0.8%. Bank stocks were lower, with Agricultural Bank of China declining 1.0% and Bank of China off 1.3%.

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