Global Fundamental Analysis 12/11/2021

Global Fundamental Analysis 12/11/2021, FP Markets

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

U.S. stocks were mixed a day after a historic inflation reading prompted the benchmark indexes’ worst losses in weeks. The U.S. bond market was closed for the Veterans Day holiday. The WSJ Dollar Index continued higher, reaching 89.2. Oil prices recouped some recent losses after OPEC’s reported October uptick in production was still below targets. Gold prices posted a sixth-straight gain.

Australian Market

Australia’s S&P/ASX 200 lost 0.6%, posting a fourth consecutive loss after a larger-than-expected rise in the country’s unemployment rate. The benchmark clawed back some of its losses but stood 1.0% lower so far this week. The tech, health and energy sectors were the biggest losers, while the heavyweight financials slipped 0.9%.


US Market

U.S. stocks mostly rose, rebounding from Wednesday’s selloff that came after an inflation reading hit a three-decade high. The S&P 500 gained about 0.1% in 4 p.m. trading, reversing direction after finishing Wednesday with its largest one-day decline in more than a month. The technology-heavy Nasdaq Composite rose 0.5%.  

The Dow Jones Industrial Average, in contrast, lost 0.4%, pulled down, in part, by Walt Disney’s worst daily performance in more than a year. Investors for months have been digesting signs of mounting inflation, but on Wednesday new data presented the most staggering figures yet.  

It was the biggest challenge so far to the idea that rising prices will be temporary and concentrated. Wednesday’s data showed that price increases were broad-based. However, there were signs that investors were once again taking the inflation reading in stride. Growth and technology stocks, which tend to perform poorly in an inflationary environment, rebounded. Financial companies, which tend to benefit from higher interest rates, rallied. Energy and materials stocks also posted strong performances.



Gold futures scored a sixth-straight session gain, with concerns over the surge in U.S. inflation prompting prices to settle at their highest since June. Prices for the precious metal added to gains the day before when they climbed in the wake of the U.S. inflation report “as traders sought out an old friend in the face of higher inflation,” said Craig Erlam, senior market analyst at Oanda, in a market update. 

Gold futures for December delivery rose 0.8% to settle at $1,863.90 an ounce, with the most-active contract logging the highest settlement since June 14. Prices stretched their winning streak into a sixth consecutive session, the longest stretch of gains since the six-day climb ended May 20, according to Dow Jones Market Data.  

Citibank strategists, however, warned that fresh momentum for the precious metal may not last beyond winter. “Should gold prices hold near $1,850/oz this week, new investor inflows are likely to materialize and $1,900/oz could be the next upside target, ” said a team of Citi strategists led by Aakash Doshi.


Oil Futures

Oil futures recouped a small portion of the losses suffered a day earlier after U.S. inflation data sent bond yields and the dollar soaring and underlined fears of a potential release of crude from the Strategic Petroleum Reserve. “The oil bulls are licking their wounds following the $3 selloff” Wednesday, said Bj? rear Tonhaugen, head of oil markets at Rystad Energy, on a daily note.  

“With little prospect of a meaningful increase in non-OPEC output in the near term, we continue to expect oil prices to hold up reasonably well between now and the end of the year,” said Kieran Clancy of Capital Economics. West Texas Intermediate crude for December delivery rose 0.3% to settle at $81.59 a barrel on the New York Mercantile Exchange after posting a loss of 3.3% Wednesday. January Brent crude, the global benchmark, rose 0.3% to settle at $82.87 a barrel on ICE Futures Europe, a day after suffering a decline of 2.5%.



Major currencies were weaker against the US dollar in European and US trade. The Euro fell from US$1.1485 to US$1.1445 and was near the lows in afternoon US trade. The Aussie dollar fell from highs near US73.20 cents to lows near US72.86 cents and was near the lows in afternoon US trade. And the Japanese yen held between 113.80 yen per US dollar and JPY114.12 and was near JPY114.05 in afternoon US trade.


European Markets

European share markets were firmer on Thursday, led by a 3.7% gain in the mining sector. Prices of base metals and iron ore rose after Chinese developer Evergrande avoided default by reportedly
making interest payments on three bond tranches worth US$148 million. Swiss chemical company Sika rose 10.9% to record highs after agreeing to buy construction chemicals maker MBCC in a US$6 billion deal. The pan-European STOXX 600 index rose by 0.3% to record highs. The German Dax index rose by 0.1%, also to record highs. And the UK FTSE index lifted by 0.6%. In London trade shares in Rio Tinto rose 3.4%. And BHP shares rose 3.9% after receiving approval for its net-zero emissions strategy.


Asian Markets

Earlier Thursday, Chinese stocks advanced, as property developers rebounded on signs that Beijing could ease its policy on the sector, while China Evergrande Group made a set of last-minute bond payments to avoid default. Building-material and home-appliance sectors rode the momentum higher. The Shanghai Composite Index added 1.2%, the Shenzhen Composite Index climbed 1.1% and the ChiNext Price Index settled 1.0% higher.

Hong Kong stocks extended their winning streak for a third straight day. The benchmark Hang Seng Index rose 1.0%. Chinese developers continued to lead gains after reports Beijing may relax financing policies in the property sector. The Nikkei Stock Average gained 0.6%, led by financial stocks which rose on prospects of higher interest rates after stronger-than-expected U.S. inflation data. However, consumer stocks were among the notable laggards.

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