Global Fundamental Analysis 04/05/2022

Global Fundamental Analysis 04/05/2022, FP Markets

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

 

U.S. stocks advanced as investors awaited the Federal Reserve’s interest-rate decision. The yield on the 10-year Treasury settled lower, then drifted up to 2.97%. The WSJ Dollar Index dropped to 95.71, giving gold prices room to move higher. Oil prices slipped amid fears Beijing will tighten up its Covid controls further.

 

Australian Market

Australia’s S&P/ASX 200 slipped 0.4% after real-estate stocks dropped on the Reserve Bank of Australia’s larger-than-expected interest-rate increase. Losses among shares of Australian real-estate investment trusts accelerated in the afternoon when the RBA raised the cash rate by 25 bps to 0.35%. Twenty-two of the ASX 200’s 23 Australian REIT stocks lost ground. The heavyweight financial sector slipped 0.3%, while consumer stocks also lost ground.

 

US Market 

U.S. stock indexes finished modestly higher as investors geared up for the Federal Reserve’s policy decision this week and evaluated a batch of earnings. Stocks moved between small gains and losses during the session, finally rising for a second straight day after a brutal selloff capped off April. The S&P 500 rose 0.5%. The technology-focused Nasdaq Composite added 0.2%. The Dow Jones Industrial Average edged up by 0.2%.  

Trading reflected a tense mood among investors expecting the U.S. central bank to accelerate its tightening of monetary policy this week, the latest step in inflation-fighting efforts that have raised borrowing costs throughout the economy this year, scrambling stock and bond markets. Recent economic data have shown higher costs on everything from groceries to gasoline.

But with higher interest rates already baked into expectations this week, equities investors had few broad moves to make as they waited for the Fed’s meeting to conclude on Wednesday, said Ron Temple, co-head of U.S. equities at Lazard Asset Management. “People are largely positioned already, because the Fed has telegraphed quite well” how it plans to raise rates, Mr. Temple said.

 

Commodities

Gold futures rose modestly, with the precious metal holding its ground after suffering its worst day in two months. Gold futures for June delivery added 0.4% to settle at $1,870.60 an ounce. The sharp climb lately in the dollar abated somewhat but it remains near 20-year highs. “We are worried about the strength of the dollar and how that might put more downward pressure on gold prices,” said Leigh Goehring, managing partner at Goehring & Rozencwajg Associates. “The dollar has been unbelievably strong.”  

That said, Goehring will tune in Wednesday afternoon for the conclusion of the Federal Reserve’s two-day policy meeting to hear more on the U.S. central bank’s plans for aggressively hiking short-term interest rates this summer to help tame inflation. “They are going to try to talk inflation down,” he said. “I don’t think they are going to be able to do it.”

 

Oil Futures

Oil futures ended lower as investors weighed prospects for a European Union embargo of Russian crude and the hit to demand from China’s Covid lockdowns. Beijing was getting new hospital facilities ready to deal with a spike in Covid-19 cases, even though the numbers of new cases remain low, the Associated Press reported. Fears of a lockdown in Beijing and lengthy restrictions on activity in Shanghai have stirred fears over demand for crude from the world’s largest oil importer.  

“Crude prices are declining as Beijing tightens up their Covid controls and as tanker-tracker data showed Russian crude flows increased,” said Edward Moya, senior market analyst at Oanda, in a note.” Energy traders are not convinced that the EU will be able to move forward with an embargo on Russian oil. West Texas Intermediate crude for June delivery fell 2.6% to close at $102.41 a barrel on the New York Mercantile Exchange. July Brent crude, the global benchmark, dropped 2.4% to $104.97 a barrel on ICE Futures Europe.

 

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro held between US$1.0490 and US$1.0575 and was near US$1.0525 at the US close. The Aussie dollar held between US70.75 cents and US71.25 cents and was near US70.95 cents at the US close. And the Japanese yen held between 129.70 yen per US dollar and JPY130.30 and was near JPY130.15 at the US close.

 

European Markets

European sharemarkets rose on Tuesday. Latest company earnings figures generally beat market forecasts and higher bond yields boosted shares of bank stocks. Shares in BP rose 5.8% after the energy giant boosted its share buyback programme after net profit soared to its highest in more than a decade. Shares in BNP Paribas rose 5.2% after posting a 19% rise in net income. The panEuropean STOXX 600 index rose by 0.5%. The German Dax rose
by 0.7%. The UK sharemarket rose by 0.2%.

 

Asian Markets

Earlier Tuesday, Hong Kong ticked higher, sustaining an afternoon recovery from losses early in the session. The benchmark Hang Seng Index edged up 0.1%. Chinese property developers led the gains, but those gains were held in check by struggling tech stocks. Australia’s S&P/ASX 200 slipped 0.4% after real-estate stocks dropped on the Reserve Bank of Australia’s larger-than-expected interest-rate increase.

Losses among shares of Australian real-estate investment trusts accelerated in the afternoon when the RBA raised the cash rate by 25 bps to 0.35%. Twenty-two of the ASX 200’s 23 Australian REIT stocks lost ground. The heavyweight financial sector slipped 0.3%, while consumer stocks also lost ground.




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