Global Fundamental Analysis 20/04/2022

Global Fundamental Analysis 20/04/2022, FP Markets

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

U.S. stocks rallied as investors sifted through the latest earnings reports. The yield on the 10-year Treasury continued its climb, reaching 2.94%. The WSJ Dollar Index jumped to 93.4, helping to send oil and gold prices lower.

Australian Market

Australia’s S&P/ASX 200 gained 0.6% amid gains by large-cap companies. The benchmark index reopened from a four-day holiday weekend and shrugged off a weak lead from U.S. equities to record a second straight advance. The heavyweight financial and materials sectors both posted solid gains as minutes from the RBA’s April board meeting were widely seen as reinforcing market expectations.


US Market 

U.S. stocks rose as investors parsed the latest round of earnings reports for insights into how businesses are weathering rampant inflation. The S&P 500 advanced 1.6%, while the Dow Jones Industrial Average added 1.5%. The tech-heavy Nasdaq Composite gained 2.2%. The gains were broad-based, with 10 of the S&P 500’s 11 sectors advancing. Only the energy group, the top-performing sector this year, declined.  

Travel stocks were among the strongest performers after a federal judge threw out the requirement that travelers in the U.S. wear masks on airplanes and other forms of mass transit. “If you actually look at TSA traveler traffic, if you look at hotel bookings, for example, those are two areas that still have not really fully recovered from their pandemic lows,” said Don Calcagni, chief investment officer at Mercer Advisors. “So I think that’s a huge tailwind.”  

The market is in the thick of earnings season with dozens of big U.S. companies expected to report this week. Given high inflation, investors are watching for signs of which firms are able to preserve their profits by passing higher costs along to customers through price increases.



Gold futures pulled back from a five-year high to record their lowest settlement in just over a week. “Heightened geopolitical risks and global growth concerns could trigger risk aversion, sending investors rushing towards gold’s safe embrace,” said Lukman Otunuga, manager, market analysis at FXTM. However, an appreciating dollar, rising Treasury yields, and expectation for a Fed interest-rate hike “may create multiple obstacles down the road.”

Chicago Fed President Charles Evans suggested that the Fed’s policy interest rate could be raised to as high as 2.5% by year end. Against that backdrop, gold futures for June delivery fell 1.4% to settle at $1,959 an ounce on Comex, the lowest most-active contract price finish since April 11, FactSet data show.


Oil Futures

Oil futures fell, pulling back from their highs of the month to settle at their lowest in a week, as traders weighed a Libyan supply outage, China’s Covid lockdowns and a surging U.S. dollar. A downgrade in the outlook for the global economy by the International Monetary Fund also weighed on energy demand expectations, against a backdrop of higher inflation expectations, pressuring prices for oil, said Michael Hewson, chief market analyst at CMC Markets UK, in a daily note.  

Oil was lifted Monday as news reports said two Libyan ports had halted oil loadings as a result of a shutdown of the Sharara oil field, the nation’s largest. Covid-19 lockdowns in China, meanwhile, have held the market back. “Clearly, the regional lockdowns that we are seeing have lasted longer than many were anticipating, and so this will have a bigger impact on oil demand in the short term.

This weaker demand helps to reduce the tightness that we are currently seeing in the market,” said Warren Patterson, head of commodities strategy at ING, in a note. West Texas Intermediate crude for May delivery fell 5.2% to settle at $102.56 a barrel on the New York Mercantile Exchange. June Brent crude, the global benchmark, dropped 5.2% to $107.25 a barrel on ICE Futures Europe.



Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.0770 to highs near US$1.0810 and was near US$1.0790 at the US close. The
Aussie dollar fell from highs near US73.97 cents to lows near US73.50 cents and was near US73.75 cents at the US close. And the Japanese yen eased from 127.80 yen per US dollar to JPY128.96 and was near JPY128.88 at the US close.


European Markets

European sharemarkets were weaker on Tuesday. Rising bond yields and worries about the war in Ukraine weighed on investor sentiment. Defensive sectors like healthcare and consumer staples
led declines although energy rose by 0.5%. The pan-European STOXX 600 index lost 0.8%. The German Dax fell by 0.1% and the UK FTSE lost 0.2%. In London trade, shares of Rio Tinto fell by
1.1% and BHP shares fell by 0.5%.


Asian Markets

Earlier Tuesday, Chinese stocks remained under pressure amid rising concerns over an economic slowdown in the second quarter. The benchmark Shanghai Composite Index inched down less than 0.1%, while the Shenzhen Composite Index slipped 0.1%. The tech-heavy ChiNext Price Index suffered the biggest drop, losing 1.4%. Consumer goods companies such as cosmetics makers, home appliance sellers and furniture firms led the downturn. Chip makers and electronics suppliers further weighed.  

Hong Kong stocks fell sharply after returning from a long holiday weekend, with the benchmark Hang Seng Index shedding 2.3%. KGI Securities in a research note attributed the weakness to recent sluggish A share performance, China’s soft economic data for the first quarter, as well as rising U.S. Treasury yields. Japanese stocks were led higher by gains in electronics and auto stocks, as the USD/JPY hit a new 20-year high. The Nikkei Stock Average rose 0.7%. Investors remain focused on yen movements, ahead of the earnings season set to start later this week.

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