Global Fundamental Analysis 12/05/2022

Global Fundamental Analysis 12/05/2022, FP Markets

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

U.S. stocks fell on higher-than-expected inflation data. The yield on the 10-year Treasury note declined to 2.918% from 2.99% on Tuesday. The WSJ Dollar Index rose 0.03% to 96.52. Oil prices finished sharply higher after inflation data showed gas prices retreated in April. And gold prices ended higher on the hotter-than-expected inflation data.

Australian Market

Australia’s S&P/ASX 200 index closed 0.2% higher after gains by iron-ore miners and health stocks helped the benchmark index to recover early losses. BHP, Fortescue Metals and Rio Tinto put on between 1.4% and 2.6% amid higher iron-ore prices.


US Market 

U.S. stocks slumped after fresh data showed that inflation — though easing — remained higher than had been expected last month, feeding renewed anxiety about the Federal Reserve’s likely response. The S&P 500 declined 1.65%. The Dow Jones Industrial Average fell 1%, while the technology-focused Nasdaq Composite Index was down 3.2%. “The Band-Aid is still coming off slowly,” said Michael Farr, the chief executive of investment advisory Farr, Miller & Washington. “According to the Fed, we’re not near the end of this process that everyone wants over.”



Gold futures finished higher, bouncing after the lowest finish in three months, as traders digested a reading on inflation that came in hotter than expected. June gold rose 0.7%, to settle at $1,853.70 an ounce on Comex, according to Dow Jones Market Data.  

“Today’s inflation report proves that (Federal Reserve Chairman Jerome) Powell made a mistake last week when he removed the option of a 75-basis point rate hike at the next policy meeting,” Edward Moya, senior market analyst at Oanda, wrote in a note. “The overall takeaway for much of Wall Street however is that the Fed is still poised to deliver consecutive half-point rate increases at the June and July FOMC meetings.”


Oil Futures

U.S. benchmark oil prices finished higher as investors worried about falling U.S. inventories of refined fuels such as gasoline and diesel fuel. West Texas Intermediate crude for June delivery rose 6% to $105.71. Brent crude, the global oil benchmark, finished the day up 4.9% to $107.51.  

Traders said signs that China’s Covid situation may be improving were also propping up prices. WTI crude is still about 4% lower for the week, and if current prices hold it could notch its first weekly fall in three weeks.



Major currencies were mostly weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0575 to lows near US$1.0508 and was near US$1.0510 at the US close. The Aussie dollar fell from highs near US70.51 cents to lows near US69.28 cents and was near US69.35 cents at the US close. But the Japanese yen firmed from 130.80 yen per US dollar to JPY129.47 and was near JPY130.00 at the US close.


European Markets

European sharemarkets climbed on Wednesday. The panEuropean STOXX 600 index rose by 1.7%, its biggest gain since late March, with consumer products and services stocks up 4.2%. German inflation in April rose to an annual 7.4% pace, its highest print since 1981 (survey: +7.4%). The German Dax index added 2.2% and the UK FTSE index gained 1.4%. In London trade, shares in Rio
Tinto rose by 3.8% and shares in BHP gained 3.7%.


Asian Markets

Earlier, in Asia, Japan’s Nikkei Stock Average edged 0.2% higher. “The optimism in the market is backed by the news that the Biden administration could drop China tariffs,” said AvaTrade’s chief market analyst, Naeem Aslam, in an e-mail. Nippon Steel climbed 6.9% after posting a fiscal-year net profit compared with a net loss the previous fiscal year. Shimadzu added 5.4% after its fiscal-year net profit rose 31%.

Chinese stocks ended higher as traders digested PPI and CPI data releases. The figures showed demand-side inflationary pressure eased last month, UOB analysts said in a note, pointing to a moderation in core CPI. The Shanghai Composite Index rose 0.8%, the Shenzhen Composite Index added 1.3% while the ChiNext Price Index advanced 3.1%. Auto stocks were higher. BYD Co. advanced 8.3% and SAIC Motor gained 0.7%.

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