Global Fundamental Analysis 05/05/2022

Global Fundamental Analysis 05/05/2022, FP Markets

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


U.S. stocks swung sharply higher after Federal Reserve Chairman Jerome Powell quashed the idea of a 75 basis-point rate hike in the near future. The yield on the 10-year Treasury slipped to 2.93% after the Fed met expectations. The WSJ Dollar Index fell to 94.82. U.S. oil prices reached a two-week-high, fueled by an EU proposal to ban Russian oil imports over time. Gold prices settled lower, but climbed after the Fed announcement.


Australian Market

Australia’s S&P/ASX 200 lost 0.2%, posting a third consecutive drop on weakness in real-estate, tech and consumer stocks. Stocks that look negatively exposed to Tuesday’s larger-than-expected rise in Australian interest rates suffered. Real estate was again the worst-performing sector, dropping 1.5%. Banking stocks rose.


US Market 

U.S. stocks rallied, rising near session highs after Fed Chairman Powell said the central bank wasn’t actively considering bigger interest-rate increases in the coming months. The S&P 500 jumped about 3%, while the Dow Jones Industrial Average gained 2.8%, and the Nasdaq Composite advanced 3.2%. All three indexes had been down earlier in the day. Stocks were initially little changed after the Fed announced it would raise interest rates by half a percentage point and begin to shrink its $9 trillion asset portfolio next month. Investors had widely expected both decisions heading into the conclusion of the central bank’s policy meeting.  

What caught some by surprise was Powell putting to rest the idea that the Fed may raise interest rates by 0.75 percentage point at a future Fed meeting this year. Federal-funds futures, which traders use to track changes in interest-rate expectations, had previously shown the market pricing in a 95% chance of the Fed making such a move in June. “There’s a sense of relief,” said Christopher Smart, chief global strategist and head of the Barings Investment Institute.



Gold futures ended regular trading with a loss, but ticked higher after the Federal Reserve delivered a half percentage point increase to its benchmark interest rate. “The Fed has increased the interest rate by 50 basis points but the fact that this was already anticipated by the markets has calmed some nerves, ” said Naeem Aslam, chief market analyst at AvaTrade, in a note.

“The dollar index has lost steam on the back of the Fed’s decision and this has helped the gold price which has been oversold as some were thinking that the Fed may increase the interest rate by 75 basis points.” Gold futures had closed ahead of the Fed announcement at $1,868.80 an ounce, down less than 0.1%


Oil Futures

Oil futures ended sharply higher after the European Union announced a proposal to phase out Russian oil. European Commission President Ursula von der Leyen proposed an embargo of Russian oil imports – seaborne and pipeline – to take effect within six months, with a phase out of refined products by the end of the year. The plan is part of a sixth package of sanctions targeting Moscow over its war in Ukraine. “Russia provides around a quarter of EU oil imports with Germany the top buyer importing around a third of its oil last year.

This development is likely to create severe headwinds for the EU economy, particularly Germany with the potential to push price levels higher and exacerbate the inflationary backdrop,” said Victoria Scholar, head of investment at Interactive Investor, in a note to clients. West Texas Intermediate crude for June delivery rose 5.3% to close at $107.81 a barrel on the New York Mercantile Exchange. July Brent crude gained 4.9% to settle at $110.14 a barrel on ICE Futures Europe.



Major currencies were stronger against the US dollar in European and US trade. The Euro rose from US$1.0505 to US$1.0630 and was near highs at the US close. The Aussie dollar rose from US71 cents to US72.65 cents and was near highs at the US close. And the Japanese yen rose from 130.27 yen per US dollar and JPY128.66 and was near JPY129.14 at the US close.


European Markets

European sharemarkets fell on Wednesday in response to “lacklustre” earnings results as well as nervousness ahead of the US Federal Reserve rate decision. After releasing earnings, shares in UK online retailer Boohoo lost 12.4%. The pan-European STOXX 600 index fell by 1.1%. The German Dax lost 0.5%. And the UK sharemarket fell by 0.9%. In London trade shares in Rio Tinto fell by 2.7% and shares in BHP fell by 2.3%.


Asian Markets

Earlier Wednesday, Hong Kong stocks ended the session lower, as mainland markets remained closed for holidays. The benchmark Hang Seng Index edged down by 1.1%. Chinese tech giants led losses, as the sector continued to decline from last week’s strength.

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Source - database | Page ID - 21704

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