Global Fundamental Analysis 08/02/2022

Global Fundamental Analysis 08/02/2022, FP Markets

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


U.S. stocks were mostly lower, with big communications-services and technology companies underperforming. The yield on the 10-year Treasury settled slightly lower before edging up 1.92%. The WSJ Dollar Index retreated to 89.6. U.S. oil prices fell, ending a six-session win streak. Gold futures posted their biggest single-session gain in nearly three weeks.


Australian Market

Australia’s S&P/ASX 200 slipped 0.1% after clawing back early losses amid strength from commodity stocks. Energy stocks jumped as Brent crude briefly hit its highest intraday level in more than seven years. The materials sector added 0.8%, helped by gains from iron-ore miners. Health, telecommunications and property trust stocks weighed, while the heavyweight financial sector edged 0.35% lower.


US Market

The S&P 500 edged lower after waffling between small gains and losses, continuing a volatile stretch for the stock market. The S&P 500 slipped 0.4%. The Nasdaq Composite declined 0.6%. The Dow Jones Industrial Average hugged the flatline.  Stocks have had a turbulent start to the year, amplified in recent days by extreme moves in big tech stocks. Friday’s better-than-expected jobs report also turned traders’ attention back to central-bank policy, which is set to tighten as the economy continues to recover.  

“We think the earnings season has been pretty constructive,” said Greg Boutle, head of U.S. equity and derivative strategy at BNP Paribas. Companies scheduled to post results this week include Pfizer and KKR on Tuesday and Uber Technologies and Walt Disney on Wednesday. Coca-Cola, PepsiCo and Twitter are slated for Thursday. Despite the recent rebound, it’s been hard to impress investors this earnings season.

Companies that are beating estimates are performing worse than they had historically, while those that are missing estimates are being punished, JPMorgan Chase & Co. strategists wrote in a note to clients. This is one of several signs that investors have grown overly bearish in recent weeks, according to JPMorgan’s Marko Kolanovic.



Gold futures logged their biggest one-day gain in almost three weeks, buoyed by inflation concerns, after posting their strongest one-week gain since mid-November. “My sense is the inflation narrative is starting to take over from the [U.S. dollar] and Treasury yields as the key driver — and hence the strong showing” for gold, said Ross Norman, chief executive officer at Metals Daily.  

Gold has benefited from the sentiment that the Federal Reserve is “getting seriously behind the curve and the chance of a policy error are manifestly higher,” he said.  April gold futures rose 0.8% to settle at $1,821.80 an ounce — the biggest one-day point and percentage gain for a most-active contract since Jan. 19 and highest settlement since Jan. 26, FactSet data show. 


Oil Futures

Oil futures finished lower after a seventh straight week of gains, with traders noting signs of progress on negotiations around Iran nuclear sanctions. The Biden administration waived sanctions on some of Iran’s civilian nuclear activities as it attempts to close a deal that would see Tehran return to the 2015 nuclear pact, The Wall Street Journal reported late Friday.  Recent oil price momentum is “stabilizing” as nuclear talks between the U.S.-Iran appear to be “making positive noise,” Pat Thaker, editorial director, Middle East & Africa at Economist Intelligence Unit, said in emailed commentary.  

Biden’s decision to restore some sanction waivers and the inability of OPEC+ to hit output targets “could ease the market tightness, and prevent oil prices from hitting $100 [a] barrel,” she said. West Texas Intermediate crude for March delivery fell 1.1% to settle at $91.32 a barrel on the New York Mercantile Exchange after the U.S. benchmark on Friday logged its highest finish since September 2014. April Brent crude, the global benchmark, lost 0.6% to settle at $92.69 a barrel on ICE Futures Europe, after ending Friday at its highest since early October 2014. 



Major currencies were mixed against the US dollar in European and US trade. The Euro generally held between US$1.1415 and US$1.455 and was near US$1.1440 in afternoon US trade. The
Aussie dollar rose from near US70.80 cents to US71.25 cents and was near highs in afternoon US trade. And the Japanese yen rose from 115.37 yen per US dollar to JPY114.91 and was near JPY115.05 in afternoon US trade.


European Markets

European sharemarkets were firmer on Monday. Refinitiv reported “gains in mining stocks and positive earnings outweighed worries of a looming policy tightening cycle and geopolitical tensions.” Mining stocks rose 1.7% in response to higher iron ore and metal prices. European Central Bank President Christine Lagarde said on Monday that price pressures could still subside
before becoming entrenched in expectations. The pan-European STOXX 600 index rose by 0.7%. The German Dax index rose by 0.7% and the UK FTSE index rose by 0.8%. In London trade, shares in Rio Tinto rose by 2.8% while BHP rose by 4.2%.


Asian Markets

Earlier Monday, Chinese stocks finished higher on the first day of trading after the week-long Lunar New Year holiday, with gains led by construction-related and energy sectors. Ahead of the annual National People’s Congress conference in March, the government may introduce more policies aimed at stabilizing growth with a focus on infrastructure and the manufacturing industry, Guotai Junan Securities said. Oil majors were buoyed by recent increases in crude prices. The Shanghai Composite Index climbed 2.0%, the Shenzhen Composite Index rose 1.0% and the ChiNext Price Index gained 0.3%.  

Hong Kong’s Hang Seng Index ended the session largely unchanged, as the market weakened from a strong rally last Friday when it returned from a multiday holiday. The Nikkei Stock Average lost 0.7%, weighed by electronics and shipping stocks amid concerns over higher borrowing costs. Electronics stocks were among the worst performers after several electronics companies posted disappointing earnings. Olympus plunged 12% after its third-quarter profits missed expectations.

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