Global Fundamental Analysis 08/03/2022

Global Fundamental Analysis 08/03/2022, FP Markets

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


U.S. stocks fell broadly as soaring oil prices pressured investors. The yield on the 10-year Treasury note rose to 1.78% compared with 1.72% on Friday. The WSJ Dollar Index rose 0.65% to 91.52. U.S. oil prices settled at a more than 13-year high, briefly topping $130, as traders weighed prospects of a ban on Russian oil. And gold posted its highest finish since August 2020 as the war in Ukraine escalated.


Australian Market

Australia’s S&P/ASX 200 index closed 1.0% lower as global oil prices surged amid investor fear over potential sanctions on the Russian oil sector. Nearly all sectors finished in the red, with only energy and materials bucking the move, closing 5.3% and 1.0% higher, respectively. Australian property insurers were down between 2.7% and 6.0% as costs from continuing floods mounted.


US Market

The Dow Jones Industrial Average dropped more than 2%, putting the blue-chip gauge into correction territory, as surging oil prices deepened concerns about economic growth. The selloff in equities also put the Nasdaq Composite Index in a bear market, defined as a 20% decline from a recent high. The moves during the start of 2022 had already sent the S&P 500 into correction territory, defined as a decline of at least 10% from a recent high. The Dow industrials joined the other indexes in correction territory Monday as the climb in oil prices threatened to feed into higher inflation.  

The Dow industrials were down 2.4% following four consecutive weeks of losses. They are down at about 11% from their January high. The S&P 500 dropped nearly 3%, bringing its 2022 decline to almost 12%. The tech-heavy Nasdaq Composite Index lost 3.6% and is down 18% year-to-date and more than 20% from its high. The S&P 500 entered a correction on Feb. 22, while the Nasdaq Composite fell into correction on Jan. 19. Attention focused on energy markets, where oil prices rose after Secretary of State Antony Blinken said Sunday that the U.S. and European partners are discussing a ban on imports of Russian oil.  

“The market’s on increasingly shaky ground,” said Hans Olsen, chief investment officer at Fiduciary Trust. “When you combine the price shocks that we’re seeing in the energy complex on one hand and the galloping inflation that we’re dealing with on the other hand, that’s a really tough mix for an equity market to hold valuations where we are right now.”



After a brief surge above $2,000 an ounce, gold marked its highest settlement since August 2020, as Russia’s unprovoked attack of Ukraine saw fresh escalation, supporting a flight to safety. April gold rose 1.5% to settle at $2,002.90 an ounce on Comex, after trading as high as $2,007.10.  

“Gold remains an attractive asset to own beyond the geopolitical issues currently dominating the headlines, as the second order consequence of events in the form of stagflation takes root,” said Ross Norman, chief executive officer at Metals Daily.


Oil Futures

U.S. benchmark oil futures posted their highest finish in more than 13 years, briefly reaching highs above the $130 mark, as momentum builds for a ban on Russian oil imports. West Texas Intermediate crude for April delivery rose 3.2% to settle at $119.40 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since September 2008, according to Dow Jones Market Data. Brent crude, the global benchmark, rose 4.3% to $123.21 a barrel after touching a peak at $139.13. The settlement was the highest since April 2012.  

“The market was already factoring in supply tightness due to voluntary import curbs by some buyers and logistical issues around the Black Sea; however, any official restrictions on Russian crude could make it further challenging to balance the oil market given that Russia is one of the major crude oil suppliers to Europe and Asia,” Warren Patterson, head of commodities strategy at ING, said in a note.



Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0950 to lows near US$1.0805 and was at US$1.0865 in afternoon US trade. The
Aussie dollar fell from highs near US74.40 cents to lows near US73.10 cents and was at US73.15 cents in US trade. And the Japanese yen eased from 114.75 yen per US dollar to JPY115.47 and was at JPY115.30 in US trade.


European Markets

European sharemarkets fell on Monday but lifted from session lows as the energy sector rose in line with higher oil prices. The energy sector rose by 4.3%. Shares in Shell soared 8%. But banks (down 4.1%) and the auto sector led declines. With discussion on possible stagflation – weak economic growth, high inflation -investors are uncertain over the future direction of interest rates. The
European Central Bank meets later this week. The pan-European STOXX 600 index fell by 1.1%. The German Dax index lost 2.0% with the UK FTSE index down by 0.4%. In London trade, shares in Rio Tinto fell by 0.1% while shares in BHP were up by 2.2%.


Asian Markets

Japanese stocks closed lower, dragged by falls in tech and auto stocks, as concerns grew about the war in Ukraine and its impact on global trade. The Nikkei Stock Average fell 2.9%. Chinese shares ended lower, as high oil prices weighed on equity markets in the region, Oanda said. “With most of Asia being massive net energy importers, it is hard to construct a bullish case,” it said. Oil refiners and airlines declined as high crude prices placed pressure on costs. The Shanghai Composite Index shed 2.2%, the Shenzhen Composite Index slid 2.7%, and the ChiNext Price Index was 4.3% lower.

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