Global Fundamental Analysis 27/10/2021

Global Fundamental Analysis 27/10/2021, FP Markets

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

U.S. stocks extended records on continued strength in earnings and as data showed consumer confidence rose in October, breaking a three-month decline. The yield on the 10-year Treasury swung between advances and declines, eventually edging lower to 1.61%. The WSJ Dollar Index ticked up to 88.20, helping push gold prices lower. U.S. oil prices hit their highest closing price since late 2014 as investors shrugged off concerns OPEC may sharply ramp up production when it meets next week.

Australian Market

Australia’s S&P/ASX 200 closed flat after giving back its early gains. The heavyweight financial and materials sectors both closed flat, leaving tech as the best performer in percentage terms.

US Market

The S&P 500 and Dow Jones Industrial Average cruised to another pair of closing records after solid earnings and upbeat consumer data gave investors a fresh dose of economic optimism. Both benchmarks advanced from Monday’s record closes. The Dow Jones Industrial Average added less than 0.1%, while the S&P 500 gained 0.2%. The Nasdaq Composite finished less than 0.1% higher.  

Earnings season so far has beaten investors’ expectations and helped lift stocks out of a September slump. United Parcel Service powered both the Dow and the S&P 500 after the delivery company topped analysts’ estimates. Investors have been buoyed by strong figures from major banks, consumer companies and manufacturers. Jitters about the labour market and inflation have somewhat given way to optimism about a recovering economy.  

Consumer confidence rose last month, halting a three-month decline, according to the Conference Board. The latest home-sales figures from the Commerce Department also highlighted an increase in purchases across the country, topping analysts’ projections.

Commodities

Gold futures declined, settling below $1,800 an ounce a day after posting a finish above that price level for the first time since mid-September. Profit-taking, along with a slight gain in the U.S. dollar and gold’s fall below the key $1,800 level, led to the selloff, said Chintan Karnani, director of research at Insignia Consultants.

“The threshold price is $1,800 for gold to continue its short term rally, ” said Mr Karnani. December gold futures declined 0.7% to settle at $1,793.40 an ounce. That followed a 0.6% climb Monday, which brought prices for the most active contract to its highest settlement since Sept. 14, according to FactSet data.

Despite the decline in gold prices, the uptrend “remains in place on the daily bar chart,” said Jim Wyckoff, senior analyst at Kitco.com, referring to a technical trading indicator. The “path of least resistance” for prices remains sideways to higher, he said.

Oil Futures

Oil futures climbed, with U.S. benchmark crude prices finishing at a fresh seven-year high on expectations that global supplies will remain tight. “There is little that can tilt oil prices away from their upwards momentum on the short term, as the only real supply source of significance, is OPEC+, and there doesn’t seem to be many moods for policy change on that front for the moment,” said Louise Dickson, senior oil markets analyst at Rystad Energy, in a daily market commentary.  

Russia’s deputy prime minister, Alexander Novak, on Monday said he expected OPEC+ next week to agree to raise output by another 400,000 barrels a day in November – in line with the timetable agreed earlier this year. Against that backdrop, West Texas Intermediate crude for December delivery rose 1.1% to settle at $84.65 a barrel on the New York Mercantile Exchange, marking the highest finish for a front-month contract since Oct. 13, 2014, according to Dow Jones Market Data.

The U.S. benchmark touched intraday highs above $85 on Monday, the highest in about seven years, before ending that day unchanged. December Brent crude, the global benchmark, climbed 0.5% to settle at $86.40 a barrel on ICE Futures Europe. Traders, however, also were wary of the potential resumption of nuclear talks with Iran that may eventually lead to more crude on the market.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro fell from near US$1.1625 to US$1.1585 and was near US$1.1600 at the US close. The Aussie dollar held between US74.88 cents and US75.24 cents and was near US75.05 cents at the US close. And the Japanese yen eased from 113.85 yen per US dollar to JPY114.30 and was near JPY114.10 at the US
close.

European Markets

European sharemarkets rose on Tuesday. Travel & leisure stocks rose 1.9%. Reuters reported that “hotel operator Whitbread reported a smaller half-year loss and predicted a full-year recovery at its UK hotels in 2022.” Financials gained 0.9% on the back of strong earnings recorded by UBS (shares up 1.3%). The pan-European STOXX 600 index rose by 0.8% to just off record highs. The German Dax index rose by 1.0%. And the UK FTSE index gained 0.8%. In London trade shares in Rio Tinto fell by 0.9% and BHP fell by 0.8%.

Asian Markets

Earlier Tuesday, Chinese stocks were dragged lower by property developers and home-appliance makers. The property sector fell for a second day after Beijing said over the weekend that it would conduct property-tax trials in parts of the country. The Shanghai Composite Index fell 0.3%, the Shenzhen Composite Index shed 0.4% and the ChiNext Price Index was 0.3% lower.  

Hong Kong’s Hang Seng Index lost 0.4%, weighed by tech and property stocks. The Hang Seng TECH Index ended down 1.3%. Alibaba Health Information Technology led the declines after indicating that it expects to record a first-half loss this year. Shares of developers also slid on news that China will pilot a new property-tax scheme in some regions, KGI Securities said.  

The Nikkei Stock Average advanced 1.8%, thanks to gains by shipping and steel-related stocks. Bio-venture company PeptiDream surged following news it plans to buy Fujifilm Toyama Chemical’s radiopharmaceutical business.

  • Global Fundamental Analysis 27/10/2021, FP Markets
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