Global Fundamental Analysis 15/06/2022

Global Fundamental Analysis 15/06/2022, FP Markets

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

U.S. stocks mostly failed to hang onto earlier gains, sending the Dow industrials and S&P 500 lower for a fifth straight day. The yield on the 10-year Treasury climbed to 3.48% as bond markets adjusted to expectations for a 75-basis-point increase from the Fed. The WSJ Dollar Index continued to rise, reaching 98.02 and pushing gold prices lower again. Oil prices drifted between gains and losses before ending the session lower as a weeks-long rally shows signs of fatigue.


Australian Market

Australia’s S&P/ASX 200 lost 3.6%, its biggest loss since May 2020, pulling it into correction territory amid rising bond yields. Losses in all 11 sectors sent the benchmark index to its lowest close since February 2021 as trade resumed following a holiday weekend and heavy selling of U.S. equities. Commodity stocks were badly hit amid fears of global inflation and a weakening in the Australian dollar. Block shed 15% and WiseTech gave up 6.0% as the tech sector fell 4.5%. The ASX 200 is about 12% down on its August 2021 peak.

US Market 

Stocks mostly continued their slide, a day after the S&P 500 closed in a bear market for the first time since 2020. The S&P 500 ended 0.4% lower, after seesawing between gains and losses for much of the day. The Dow Jones Industrial Average lost 0.5%, while the Nasdaq Composite gained 0.2%. “The mood’s bad,” said Michael Mullaney, director of global markets research at Boston Partners. “History does not bode well for the market when it goes down into bear-market territory.”

In previous bear markets since World War II, the S&P 500 has fallen a further 12.4 percentage points on average from the date the 20% mark was breached, Mr. Mullaney’s data shows. Compounding investors’ jitters is concern that the Federal Reserve’s efforts to fight inflation will push the U.S. economy into a recession. The Fed is set to release a monetary policy decision on Wednesday, after a two-day meeting.

The Wall Street Journal reported on Monday that the policy makers are considering a 0.75-percentage-point interest-rate increase. Futures markets have priced in a more than 90% likelihood of such a rate increase being announced, according to data from exchange operator CME Group.



Gold ended lower, with prices settling at their lowest in more than a month, as investors braced for the outcome of this week’s Federal Reserve meeting. Gold futures for August delivery fell 1% to settle at $1,813.50 an ounce on Comex, the lowest most-active contract finish since May 13, FactSet data show. The U.S. dollar continues to “catch a big tailwind from rising U.S. interest rates, with the 10-year Treasury yield soaring toward 3.45%” ahead of Wednesday’s Fed decision on rates, said Colin Cieszynski, chief market strategist at SIA Wealth Management.  

Market action appears to be pricing in a 75 basis point rate increase, so “we could see significant volatility around the decision”, he said. Gold may remain active through the Fed meeting and a retest of $1,785, where the precious metal bottomed out in May, “remains a possibility, with next potential support if that fails closer to $1,760,” he said.


Oil Futures

Oil futures surrendered early gains, brought on by supply disruptions in Libya, to finish with a loss. Traders weighed news developments linked to the Iran nuclear deal, a waiver extension allowing U.S. banks to process Russian energy transactions, and a report that a U.S. senator intends to propose a federal surtax on certain oil companies in a move to curb inflation. West Texas Intermediate crude for July delivery fell nearly 1.7% to settle at $118.93 a barrel on the New York Mercantile Exchange after trading as high as $123.68.

August Brent crude, the global benchmark, lost 0.9% at $121.17 a barrel on ICE Futures Europe, the lowest finish since June 7. The U.S., meanwhile, announced an extension of a waiver that enables U.S. banks and financial institutions to process transactions involving Russian energy to other countries. Also, the U.S. Energy Department announced contract awards related to the Strategic Petroleum Reserve on Tuesday, as well as a fourth emergency sale of crude oil from the reserve. Those news developments contributed to a turn in the tide for oil prices, said Phil Flynn, senior market analyst at The Price Futures Group.



Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0480 to lows near US$1.0400 and was near US$1.0415 at the US close. The Aussie dollar fell from highs near US69.70 cents to lows near US68.50 cents and was near US68.70 cents at the US close. The Japanese yen weakened from near 134.00 yen per US dollar to JPY135.45 and was near JPY135.30 at the US close.


European Markets

European sharemarkets reversed early gains to finish lower on Tuesday. Healthcare lost 1.8% and industrials lost 1.7% but banks rose by 1.1% and oil & gas rose by 0.8%. The pan-European STOXX 600 index fell for the sixth straight day, down by 1.3% to 3- month lows. The German Dax index fell by 0.9% and the UK FTSE index lost 0.3%. In London trade, shares of Rio Tinto fell by 0.4% and shares in BHP fell by 0.2%.


Asian Markets

Earlier Tuesday, Chinese stocks ended higher, supported by the auto and energy sectors. Car makers have risen over recent sessions amid recovering demand prospects, while Chinese oil majors tracked oil futures higher. Great Wall Motor jumped 7.3% and Chongqing Changan Automobile surged 10%, while PetroChina gained 5.4% and Cnooc was 4.0% higher. The Shanghai Composite Index rose 1.0%, the Shenzhen Composite Index climbed 0.2% and the ChiNext Price Index was 0.1% higher.

Hong Kong’s Hang Seng Index closed flat, erasing the session’s early losses. Even though recessionary fears weighed on sentiment, there were small gains in futures tied to U.S. equity benchmarks, which have “taken the edge off the negativity in Asian markets today,” Oanda senior market analyst Jeffrey Halley said in a note. The Hang Seng Tech Index ended 0.1% lower. Japan’s Nikkei Stock Average fell 1.3%, tracking Wall Street’s sharp decline overnight, although the benchmark’s losses pared somewhat amid gains in U.S. stock futures. Losses on Nikkei were broad-based, with Daiichi Sankyo dropping 7.0%, NEXON losing 5.65% and Hoya falling 5.2%.

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