Global Fundamental Analysis 07/09/2022

Australian Market

Australia’s S&P/ASX 200 index lost 0.4% as the Reserve Bank of Australia’s commentary alongside its latest 50bp rise in interest rates spooked investors. Consumer stocks were sold off.

US Market 

U.S. stock indexes fell, driven by expectations for tighter Federal Reserve policy and an energy crisis in Europe. The S&P 500 declined 0.4% after the long Labor Day weekend. The Dow Jones Industrial Average slid 0.6%, while the tech-focused Nasdaq Composite lost 0.7%. The major indexes all have fallen for three consecutive weeks.

Within the S&P 500, seven out of 11 sectors were in the red during afternoon trading, with industrials, healthcare, real estate and utilities gaining. “It’s going to be really focused on, ‘OK, just how bad does it become, given how restrictive the Fed has been and continues to be?'” said Tim Chubb, chief investment officer at Girard Wealth Advisory.

Commodities

Gold futures for December delivery declined by 0.6% to settle at $1,712.90 per ounce on the back of a stronger U.S. dollar. “Tough talk on inflation will likely continue to weigh on gold, rather than propel gold higher simply because inflation itself is high,” analysts at RBC Capital wrote in a research note. Still, “the need to rein in inflation and keep raising rates as a theme is a more important headwind – there is no way around it.

Oil Futures

U.S. oil prices were flat, but global oil futures gave back the gains scored in the previous session after the Organization of the Petroleum Exporting Countries and its allies agreed to cut output by 100,000 barrels a day in October. October West Texas Intermediate crude edged up by a penny to settle at $86.88 a barrel on the New York Mercantile Exchange. November Brent crude, the global benchmark, fell 3% to settle at $92.83 a barrel on ICE Futures Europe.  

OPEC+ agreed on Monday to cut output by 100,000 barrels a day in October, reversing a September rise agreed at the group’s previous meeting in early August. In terms of signaling, “the move is important as it indicates that OPEC+ is watching demand very closely and is trying to manage supply to keep a floor on oil prices,” said Noah Barrett, research analyst for energy & utilities at Janus Henderson Investors.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$0.9984 to lows near US$0.9865 and was near US$0.9900 at the US close. The Aussie dollar dipped from highs near US68.00 cents to lows near US67.25 cents and was near US67.30 cents at the US close. And the Japanese yen eased from near 140.90 yen per US dollar to
JPY143.05 and was near JPY142.80 at the US close.

European Markets

European sharemarkets closed higher on Tuesday. The panEuropean STOXX 600 index rose by 0.2% with auto stocks up 1.9%. The German Dax index lifted 0.9% with Volkswagen shares up 3.7%
on its decision to trigger an IPO of its sports car brand Porsche. And the UK FTSE index rose by 0.2% on reports that incoming UK Prime Minister Liz Truss could freeze energy bills. In London trade, shares in Rio Tinto were little changed but BHP shares slid 2.0%.

Asian Markets

Earlier Tuesday, Chinese shares ended higher, as concerns over the country’s ongoing Covid-19 outbreaks eased somewhat. The benchmark Shanghai Composite Index rose 1.4%, the Shenzhen Composite gained 1.2% and the ChiNext Price Index added 0.1%. Financial sector may remain in focus after the PBOC announced Monday that it would lower the foreign exchange reserve requirement ratio for banks to 6%.

Hong Kong’s Hang Seng Index slipped 0.1%, extending a losing streak to the fourth session as a Covid-19 resurgence in China continued to weigh on sentiment. The Nikkei Stock Average closed flat as gains in pharmaceutical and steel stocks helped offset losses in retail and information technology stocks.