Global Fundamental Analysis 16/03/2022

Global Fundamental Analysis 16/03/2022, FP Markets

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


U.S. stocks surged as oil prices slid below $100. The yield on the 10-year Treasury note rose to 2.15% from 2.14% on Monday. The WSJ Dollar Index fell 0.11% to 91.87. U.S. oil prices entered a bear market just five days after nearing a 14-year highs. And gold fell as investors assessed inflation data and looked to Wednesday’s Federal Reserve policy decision.


Australian Market

Australia’s S&P/ASX 200 index closed 0.7% lower on weakness in commodity stocks. Iron-ore, gold and energy stocks all fell on softness in commodity prices, while the tech sector slid following a weak lead from the Nasdaq Composite, which hit a 52-week low. Rio Tinto, BHP and Fortescue gave up between 3.9% and 4.9% as the materials sector suffered its biggest one-day loss in three weeks. Gold miners sustained similar losses.

Energy producers Woodside, Santos and Beach dropped by between 2.85% and 5.0%. Financial stocks pared the overall losses as banks ANZ, NAB, Westpac and Commonwealth added between 0.4% and 1.75%.


US Market

U.S. stocks climbed after a retreat in oil prices eased investors’ inflation concerns and the prospect that the Federal Reserve will move more aggressively to lift interest rates. The S&P 500 rose 2.1% while the blue-chip Dow Jones Industrial Average advanced 1.8%. The technology-heavy Nasdaq Composite Index added 2.9%. Oil prices dropped back below $100, undoing much of the price surge since Russia invaded Ukraine. Oil’s decline came as investors waited for Wednesday’s decision by the Fed, which is expected to raise rates for the first time since 2018.  

“You have this negative correlation right now where when oil goes up, the market goes down, and when oil is down the market goes up,” said Jack Janasiewicz, lead portfolio strategist for Natixis Investment Managers Solutions. “If you can get oil to calm down to preinvasion levels, it gives us a little more confidence that inflation is not running away and making things more difficult for the Fed.”



Gold futures fell sharply to mark their lowest finish in nearly two weeks as investors assessed the latest U.S. data on inflation and looked to the Federal Reserve, which is expected to raise benchmark interest rates this week. April gold fell 1.6% to settle at $1,918.10 an ounce, the lowest most-active contract finish since March 2, according to FactSet data. The “risk-reward of holding bullion, “with the Fed looking to hike rates to cool inflation, has taken some of the steam out of gold, said Stephen Innes, managing partner at SPI Asset Management, in a note.


Oil Futures

U.S. and global benchmark crude oil officially entered a bear market, just five trading days after they settled at their highest prices since 2008. The front-month April West Texas Intermediate crude futures contract fell 6.4% to settle at $95.25 a barrel on the New York Mercantile Exchange. That’s down 22% from the March 8 settlement of $123.70, which was the highest finish since Aug. 1, 2008, according to Dow Jones Market Data. May Brent crude lost 6.5% to settle at $98.69 a barrel on ICE Futures Europe.

That’s down 22% from the March 8 settlement of $127.98, which was the highest finish since July 22, 2008. “The collapse has been spectacular,” Fawad Razaqzada, market analyst at ThinkMarkets, said in a market update. The biggest driver behind the selloff in oil has been “investor realisation that Europe is not going to wean off Russian oil supply immediately,” said Razaqzada. “Everything else is secondary, including the potential return of Iranian oil supply.”



Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1018 to lows near US$1.0925 and was near US$1.0945 at the US close. The Aussie dollar held between US71.68 cents and US72.26 cents and was near US71.95 cents at the US close. And the Japanese yen held between 117.73 yen per US dollar and JPY118.38 and was near
JPY118.29 at the US close.


European Markets

European sharemarkets fell modestly on Tuesday. Worries about a Covid outbreak in China and apprehension about interest rate decisions in the US and UK weighed on sentiment. Data also
showed a record drop in the euro-zone ZEW economic sentiment survey in March. Miners fell 2.1% and led the losses. The panEuropean STOXX 600 index eased by 0.3%. The German Dax index
fell by 0.1% and the UK FTSE index lost 0.3%. In London trade, shares in Rio Tinto fell 1.7% and BHP fell by 2.0%.


Asian Markets

Japanese stocks ended higher, led by gains in auto stocks, as declining crude oil eased concerns about higher costs of fuel and raw materials. Financial stocks gained. Meanwhile, energy and mining stocks fell, giving up some of their recent gains. The Nikkei Stock Average rose 0.2%. Chinese stocks ended sharply lower, extending a selloff as the country continued to record sharply higher Covid-19 infections after two years of near-zero cases.

The benchmark Shanghai Composite Index slumped 4.9% while the Shenzhen Composite Index dived 4.6%. The ChiNext Price Index held up relatively better, dropping 2.6%. Oil-related stocks such as oil industry services companies and engineering services providers led the downturn, as crude prices withdrew. Precious metal miners further weighed on the market after gold prices fell on profit-taking pressure.

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