Global Fundamental Analysis 05/04/2022

Australian Market

Australia’s S&P/ASX 200 climbed 0.3%, with resources stocks helping drive some of the gain. Utilities and materials stocks were stand out sectors, closing up 1.1% and 1.0% respectively.

US Market 

U.S. stocks climbed as investors scooped up some of the technology stocks that came under pressure to start the year. The tech-focused Nasdaq Composite Index gained 1.9%, while the S&P 500 added 0.8%. The Dow Jones Industrial Average rose 0.3%. The indexes have rallied over the past three weeks after the Federal Reserve raised interest rates for the first time since 2018 in a bid to curb inflation. Indexes edged higher Friday, buoyed by a solid employment report.  

Twitter shares surged 28% to lead the S&P 500 after Tesla Chief Executive Elon Musk reported that he held a stake of 9.2% in the social-media company as of March 14. Investor sentiment continues to track the war, with many watching whether new reports of war crimes will add to pressure on the Biden administration and European allies to tighten sanctions on Russia. Analysts say pressure on the West to ban Russian oil is gathering steam. The reports come amid peace talks currently under way between Kyiv and Moscow and could complicate those discussions.  

“Given all the uncertainty that’s still out there, I’m a bit surprised at how strong the equity market is,” said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. “The long-term consequences of the conflict will be higher inflation over the long term.”

Commodities

Gold futures edged higher, bouncing after last week’s pullback, finding support from growing concerns over inflation, as investors monitored developments in the Russia-Ukraine war and inflation worries grew. The precious metal shook off pressure from a further rise in Treasury yields and a slightly stronger dollar. “Gold is holding up fairly well in the face of multiple super-sized rate hikes being priced into the markets and risk appetite remaining fairly strong,” said Craig Erlam, senior market analyst at OANDA, in a market update.  

“The inflation risk is seemingly providing plenty of support, which is why we’re seeing so many rate hikes being priced into the markets, along with the downside economic risks that continue to mount,” he said. Gold futures for June delivery rose 0.5% to settle at $1,934 an ounce after falling 1.6% last week.

Oil Futures

Oil futures settled higher, with U.S. prices back above the $100 mark after posting the biggest weekly drop in two years, as European leaders called for additional sanctions against Moscow following images over the weekend showing evidence of Russian atrocities in Ukraine. The weekend saw grim headlines and images emerge out of Ukraine as Russian forces pulled back from positions near Ukraine’s capital, Kyiv. Images of bodies, many showing signs of torture, in the city of Bucha prompted several European leaders to call for tougher sanctions against Moscow.  

“As long as the geopolitical uncertainty linked to the Russia-Ukraine war persists, global oil markets will maintain a fear-bid,” said Tyler Richey, co-editor at Sevens Report Research. West Texas Intermediate crude for May delivery rose 4% to $103.20 a barrel on the New York Mercantile Exchange. June Brent crude, the global benchmark, was up 3.3%, at $107.81 a barrel on ICE Futures Europe. WTI, the U.S. benchmark, fell 12.8% last week, while Brent dropped 11.1%, the biggest weekly percentage declines for both since late April 

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1052 to lows near US$1.0959 and was near US$1.0970 at the US close. But the Aussie dollar rose from lows near US75.04 cents to highs near US75.56 cents and was near US75.45 cents at the US close. And the Japanese yen eased from 122.50 yen per US dollar to JPY122.91
and was near JPY122.75 at the US close.

European Markets

European sharemarkets climbed on Monday. The pan-European STOXX 600 index gained 0.8% with technology shares up 2.1% after Tesla CEO Elon Musk purchased a 9.2% stake in Twitter. Sentix’s investor sentiment index for the eurozone fell from -7 to -18 in April (survey: -9.2), hitting its lowest level since July 2020. The German Dax index added 0.5% and the UK FTSE index gained 0.3%. In London trade, shares of Rio Tinto (-1.5%) and BHP (-0.7%) both fell.

Asian Markets

Earlier Monday, Hong Kong stocks posted strong gains as Chinese tech giants rebounded on Beijing’s proposed rule change that could allow the country’s internet companies to keep their ADR listings. The benchmark Hang Seng Index rose 2.1% and the Hang Seng TECH Index jumped 5.4%. Drug makers offered the market further support following progress on Covid-19 vaccine development.  

Japanese stocks also rose, led by gains in electronics and pharmaceutical stocks, thanks to the prospects of a strong U.S. economic recovery and an easing of the recent trend higher in commodity prices. The Nikkei Stock Average rose 0.3%.