Global Fundamental Analysis 15/12/2021

Global Fundamental Analysis 15/12/2021, FP Markets

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


U.S. stocks fell ahead of the latest Federal Reserve decision, as producer prices rose more than expected and Omicron cases ticked up. The data helped push the yield on the 10-year Treasury up to 1.44%. The WSJ Dollar Index climbed to 90.4, contributing to a drop in gold prices. U.S. oil prices ended at their lowest in six sessions, as Covid-related demand fears coincided with accelerating production.


Australian Market

Australia’s S&P/ASX 200 closed flat after rallying from an early sell-off. The heavyweight materials and financial sectors gained 0.7% and 0.2%, respectively, while property trusts and communications stocks also rose. Retailer Woolworths shed 7.8% after outlining Covid-related costs.


US Market

U.S. stocks ended lower ahead of the Federal Reserve’s two-day policy meeting, which is expected to end with the central bank signalling a faster wind-down of its bond-buying program. The S&P 500 fell 0.8%. The index also declined Monday, pulling the gauge back from a record notched last week. The tech-focused Nasdaq Composite Index slipped 0.3%, while the Dow Jones Industrial Average dropped 1.1%.  

Investors are watching to see if the uptick in Covid-19 cases and the new Omicron variant change how quickly the Fed will end easy-money policies that have helped fuel this year’s stock rally. The central bank, which concludes its meeting Wednesday, could also signal that it will raise interest rates sooner than expected next year to try to curb inflation.  

“It’s a fairly challenging backdrop for the market,” said Hani Redha, a portfolio manager at PineBridge Investments. “Things have been fairly directionless in the lead-up to this. The market wants to see confirmation of what they’re going to do.”



Gold futures also declined, with prices marking their lowest finish in nearly two weeks. Investors braced for the outcome of meetings among central bankers this week, headlined by the Fed, which could catalyze moves in precious metals.

The Fed is expected to “start raising interest rates earlier than expected in order to control inflation,” said Chintan Karnani, director of research at Insignia Consultants. So for gold, there is “repositioning” before the meeting, he said, and gold’s inability to break the $1,800 mark has “resulted in short term traders avoiding gold.” February gold futures fell 0.9% to settle at $1,772.30 an ounce on Comex, for the lowest finish since Dec.2, FactSet data show.


Oil Futures

Oil futures dropped to their lowest settlement in more than a week after the International Energy Agency said the Omicron variant would slow recovery in demand for crude. The combination of the “hawkish, risk-off reaction by markets to the ‘hot’ [producer price index] print,” a bearish International Energy Agency report suggesting the global oil market is already flipping to a surplus and an increased number of governments and major corporations implementing stricter Covid-19 policies all weighed on the energy markets, said Tyler Richey, co-editor at Sevens Report Research.  

West Texas Intermediate crude for January delivery fell 0.8% to settle at $70.73 a barrel on the New York Mercantile Exchange after tapping an intraday low of $69.51. February Brent crude, the global benchmark, lost 0.9% to $73.70 a barrel on ICE Futures Europe. Both WTI and Brent crude contracts marked their lowest front-month contract settlements since Dec. 6, according to Dow Jones Market Data.



Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1322 to lows near US$1.1252 and was near US$1.1255 at the US close. The Aussie
dollar lifted from lows near US70.97 cents to highs near US71.35 cents and was near US71.00 cents at the US close. And the Japanese yen eased from 113.43 yen per US dollar to near JPY113.75 at the US close.


European Markets

European share markets ended lower for a fifth straight session on Tuesday. The pan-European STOXX 600 index fell by 0.8% with technology shares down 2.4%. Shares of British pest control
company Rentokil plunged 12.3% after it agreed to a US$6.7 billion deal to buy US rival Terminix. The German Dax index lost 1.1% and the UK FTSE index slid 0.2%. In London trade, shares in Rio Tinto rose by 2.2% and BHP shares lifted 2%.


Asian Markets

Earlier, Chinese stocks were weighed down by energy and auto stocks. The Shanghai Composite Index lost 0.5%, the Shenzhen Composite Index declined 0.1% and the ChiNext Price Index fell 0.1%. Energy stocks were among the worst performers, following news of China’s first Covid-19 Omicron variant case. Investors are awaiting China data, including industrial production, retail sales and fixed asset investment, due later this week.  

Hong Kong shares slipped as property-related stocks fell amid renewed concerns that more companies could seek repayment extensions. The Hang Seng Index ended 1.3% lower while the Hang Seng Tech Index fell 2.3%. Japan’s Nikkei Stock Average was dragged lower by aviation and consumer-related stocks amid concern over the spread of the Omicron variant.

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