Global Fundamental Analysis 20/10/2021

Global Fundamental Analysis 20/10/2021, FP Markets

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

U.S. stocks gained amid a continued boost from strong earnings reports. The yield on the 10-year Treasury climbed to 1.64%. The WSJ Dollar Index fell to 88.17, helping push gold prices higher. WTI oil prices finished at a seven-year-high for the seventh time in the past eight sessions.

Australian Market

Australia’s S&P/ASX 200 slipped 0.1% after giving up early gains. Weakness among commodity stocks and the energy sector offset strength elsewhere. The heavyweight financial sector edged lower by 0.2%, leaving the tech, health and consumer discretionary sectors as the top performers.

US Market

U.S. stocks rose as investors parsed earnings reports for insight into how companies are coping with inflation and supply-chain disruptions. The S&P 500 gained 0.7%, while the Dow Jones Industrial Average added 0.6%. The tech-heavy Nasdaq Composite rose 0.7%.

The third-quarter earnings season is in its early days, with about 10% of S&P 500 companies having reported. Of those, roughly four out of five have beaten profit forecasts, according to FactSet. A handful of strong reports have helped calm fears of how badly inflation and supply-chain problems would affect corporate results, said Lamar Villere, portfolio manager at investment firm Villere & Co. “I wouldn’t say the fog has been lifted or the fear is gone, but at least you’ve got some reasonably positive data points,” he said.



Gold futures also ended higher, bucking headwinds from a rise in global stocks, as a weaker U.S. dollar helped prices for the precious metal score their first gain in three sessions. Gold prices have recovered slowly in October, caught between worries about rising inflation and concerns that central banks might lift interest rates in response, along with growing anxieties about waning global economic growth.

“The precious metal is likely to be influenced by conflicting forces this week as investors juggle growth concerns and inflation fears amid prospects of tighter monetary policy,” wrote Lukman Otunuga, senior research analyst at FXTM, in a note. Gold futures for December delivery climbed 0.3% to settle at $1,770.50 an ounce, following a 0.2% decline on Monday, which was its second straight decline.


Oil Futures

Oil futures climbed to finish at fresh multiyear highs, on reports that Russia’s offer to boost natural-gas supplies to Europe may come with a catch. Russia has indicated that it may not provide additional natural gas to European consumers amid an energy crunch in the region unless it gets regulatory approval to start shipments through the Nord Stream 2 pipeline, Bloomberg reported, citing people close to state-run gas giant Gazprom and the Kremlin. The controversial pipeline can run natural gas from Russia into the European Union but awaits regulatory approval.

The Russians are “in no hurry whatsoever to comply” with demands from the European Union, said Phil Flynn, senior market analyst at The Price Futures Group. “Europe decided to play Russian roulette [by] depending on Russia as a reliable supplier of natural gas, and now it looks like they lost. “West Texas Intermediate crude for November delivery rose 0.6% to settle at $82.96 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since Oct. 13, 2014, according to Dow Jones Market Data. December Brent crude, the global benchmark, climbed 0.09% to settle at $85.08 a barrel on ICE Futures Europe, its highest since Oct. 3, 2018.



Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1665 to lows near US$1.1630 and was near US$1.1635 at the US close. The Aussie
dollar rose from lows near US74.55 cents to highs near US74.85 cents and was near US74.75 cents at the US close. And the Japanese yen eased from 113.88 yen per US dollar to JPY114.34 and was near the weakest levels at the US close.


European Markets

European share markets closed firmer on Tuesday. The pan-European STOXX 600 index rose by 0.3%. Utilities rose 1.3% with industrials up 0.9%. But the food & beverage sector fell 0.9%, dragged lower by a 3% fall by Danone, which warned about rising inflationary pressures. Telecom shares fell 0.8%, dragged lower by a 3.7% fall in shares of Ericsson. Ericsson announced plans to reduce its operations in China. The German Dax index lifted 0.3% and the UK FTSE index edged higher by 0.2%. In London trade shares in Rio Tinto rose by 1.0% and shares in BHP lifted by 1.1%.


Asian Markets

Earlier Tuesday, Chinese stocks ended the session higher, showing signs of recovery from the range-bound trading pattern so far this month. The benchmark Shanghai Composite Index rose 0.7%, while the Shenzhen Composite Index added 0.9%. The ChiNext Price Index, a measure for emerging industries and startups, gained 0.6%. The agriculture sector, with companies such as hog raisers, led the gains, amid a recent increase in pork prices in China. Food and beverage producers lent further support as the industry rebounded from its losses on Monday.  

Hong Kong advanced for the third consecutive trading day, partly driven by hopes that Beijing may introduce more policy support in the coming months. The benchmark Hang Seng Index rose 1.5%. Smartphone maker Xiaomi led gains after Chief Executive Lei Jun said the company plans to mass-produce its own electric cars in the first half of 2024. Other tech stocks followed the upbeat momentum. The Hang Seng TECH Index gained 3.1%. Japan’s Nikkei Stock Average rose 0.7% as gains in e-commerce, chip and shipping stocks helped offset some losses in energy, airline and auto stocks. Investors are focusing on developments in economic policy ahead of Japan’s lower-house election later this month.

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