Global Fundamental Analysis 11/04/2022

Global Fundamental Analysis 11/04/2022, FP Markets

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


U.S. stocks were mixed as the market weighed recent news from the Federal Reserve and the Russian invasion of Ukraine. The yield on the 10-year Treasury advanced to 2.66%. The WSJ Dollar Index edged higher to 92.27. U.S. oil prices rose, but still ended the week with a 1% decline. Gold prices rose despite the strengthening dollar.


Australian Market

Australia’s S&P/ASX 200 climbed 0.5%, boosted by strong performances from resources companies. At the same time, the Reserve Bank of Australia’s latest financial stability review said household and business balance sheets had strengthened over the past six months. Materials was Friday’s standout sector, closing 1.25% higher, while the technology sector proved to be a drag, finishing the day down 0.2%. Australia’s benchmark index fell 0.2% for the week.


US Market 

Uncertainty about Federal Reserve policy and the war in Ukraine pushed the S&P 500 lower and stoked a selloff in the government bond market. The S&P 500 lost 0.3%. The tech-heavy Nasdaq Composite declined 1.3%. The blue-chip Dow Jones Industrial Average reversed early losses to close 0.4% higher. All three major indexes ended the week with losses. The S&P 500 snapped a three-week winning streak that had sent it toward its best performance since November 2020, losing 1.3%. The Dow and Nasdaq lost 0.3% and 3.9%, respectively.

Throughout the week, investors remained preoccupied with commentary from Federal Reserve officials as well as the minutes from the central bank’s March policy meeting. The swings in assets across the market highlight how murky the path of the economy remains for many investors, who are trying to pick the winners and losers of the rising interest-rate regime and grappling with surging commodity prices world-wide. “The Fed has been the number-one story and that continues,” said James Athey, an investment manager at Abrdn. “The effect of the sort of tightening that has been discussed, that has a history of being very destabilizing.”



Gold futures advanced for the session and logged a weekly gain as traders brushed off typically negative factors like rising Treasury yields and a stronger U.S. dollar. Gold futures for June delivery rose 0.4% to close at $1,945.60 an ounce on Comex, leaving it up 1.1% for the week. “Gold is trading around the same level it was yesterday, the day before that, the day before that and so on. Despite the spike in volatility seen elsewhere this week as a result of the hawkish Fed shift, gold has been unmoved,” said Craig Erlam, senior market analyst at Oanda, in a note.

Analysts said gold’s role as an inflation hedge appears to be buoying the metal, with an important cost of living due Tuesday with release of the March consumer price index. “The CPI report will be the economic event of the week,” David Donabedian, chief investment officer of CIBC Private Wealth US. “We expect inflation to surge above 8%. We now the commodity component will spike and will be paying particular attention to the core inflation rate, particularly services and shelter.”


Oil Futures

Oil futures ended higher Friday, but logged a second, consecutive weekly decline as several countries joined the U.S. in releasing crude reserves. Crude has seen volatile trade since Russia’s late-February invasion of Ukraine, with the U.S. benchmark briefly trading at a roughly 14-year high above $130 a barrel in early March, while Brent came within a whisker of $140. The “massive” release of oil from emergency reserves was expected to noticeably ease the supply situation, said Carsten Fritsch, an analyst at Commerzbank.

Meanwhile, the lockdown of Shanghai by Chinese authorities in response to Covid-19 cases has been extended, adding to price weakness, Fritsch wrote. “This means that the business metropolis with its 25 million inhabitants, which accounts for around 4% of Chinese oil demand, is condemned to remain at a standstill,” he said. West Texas Intermediate crude for May delivery rose 2.3% to close at $98.26 a barrel on the New York Mercantile Exchange, leaving the U.S. benchmark with a weekly drop of 1%. June Brent crude, the global benchmark, gained 2.2% to finish at $102.78 a barrel on ICE Futures Europe, leaving it with a weekly drop of 1.5%.



Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0888 to lows near US$1.0835 and was near US$1.0875 at the US close. The Aussie dollar fell from highs near US74.90 cents to lows near US74.26 cents and was near US74.55 cents at the US close. And the Japanese yen eased from 123.93 yen per US dollar to JPY124.64 and was near JPY124.30 at the US close.


European Markets

European sharemarkets rose on Friday as investors too advantage of beaten down stock valuations. The pan-European STOXX 600 index closed higher by 1.3% with energy shares up 3.4%. Banks rose by 2.2% after Credit Agricole (-0.02%) bought a 9.2% stake in Italian lender Banco BPM (+10.2%). The STOXX 600 rose by 0.6% over the week. France’s CAC 40 index also added 1.3% on Friday ahead of the first round of French presidential elections over the weekend. The German Dax index lifted 1.5% and the UK FTSE index gained 1.6%. In London trade, shares of Rio Tinto rose
by 0.8% and BHP shares jumped 2.2%.


Asian Markets

Earlier Friday, Chinese stocks ended mixed, extending a rangebound trading pattern. The benchmark Shanghai Composite Index rose 0.5%, the sole gainer among the three major indexes. The Shenzhen Composite Index gave back 0.3% and the tech-heavy ChiNext Price Index fell 0.3%. Media companies, including digital news outlets, cinema operators, broadcasters and advertisers, led losses. Gains were concentrated in the engineering and infrastructure sectors, as strong new order data from some leading industry players boosted investor sentiment, while Beijing’s promise of more policy stimuli stoked buying interest.

Property companies led Hong Kong shares higher after two sessions of declines, with the benchmark Hang Seng Index rising 0.3%. The property sector resumed its recovery from recent steep losses, as investor sentiment turned more favorable on the industry’s second-quarter sales outlook. Tech stocks fell after Tencent said it will close its game streaming service. Japanese stocks were led higher by gains in electronics and tech stocks, as oil prices eased somewhat, alleviating concerns about higher costs of raw materials. The Nikkei Stock Average rose 0.4%. The war in Ukraine and commodity prices remain in focus.

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