Global Fundamental Analysis 22/03/2022

Global Fundamental Analysis 22/03/2022, FP Markets

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

U.S. stocks declined after Federal Reserve Chairman Jerome Powell said the Fed will consider more aggressive interest-rate increases to cut inflation. The yield on the 10-year Treasury climbed to 2.3% as the yield curve flattened further. The WSJ Dollar Index rose to 91.3. Oil prices soared amid growing support for an EU-wide ban on the purchase of Russian crude oil. Gold prices nudged higher.

Australian Market

Australia’s benchmark S&P/ASX 200 index lost 0.2%, giving up gains earlier in the day and snapping a three-day winning-streak. Industrials fell 1.2% and health care companies dropped 1%, while information-technology shares advanced 2.5% and utilities climbed 0.8%.

US Market

Investors sold stocks and government bonds after Federal Reserve Chairman Jerome Powell reiterated the central bank’s commitment to controlling inflation through a rapid series of interest-rate increases. The S&P 500 edged lower by less than 0.1% following comments from Mr. Powell about the possibility of more-aggressive interest-rate moves to tame inflation. Treasury yields rose following his comments, reaching their highest level since May 2019.  

The tech-focused Nasdaq Composite Index lost 0.4% while the Dow Jones Industrial Average slipped 0.6%. Boeing shares fell 3.6% after a Boeing 737 passenger plane operated by China Eastern Airlines carrying more than 130 people crashed in southern China. Investors digested comments from Mr. Powell as he discussed the economic outlook. Speaking at the National Association for Business Economics, he said the central bank was prepared to raise interest rates in half-percentage-point steps-and high enough to deliberately slow the economy-if needed.  

“Investors are taking Powell’s transparency as a step further to say ‘He’s just preparing us for the worst,'” said Shannon Saccocia, chief investment officer at Boston Private. “Whereas, bond market is saying, ‘No, no, he’s telling you he’s going to do at least seven [rate increases], and you aren’t listening.



Gold futures eked out only their second gain in seven sessions as investors weighed developments in the Russia-Ukraine war and the Federal Reserve’s next moves to help stave off inflation. “Traders are trying to assess the economic impact of Ukraine in the second quarter and further quarters,” said Chintan Karnani, director of research at Insignia Consultants. “Hyperinflation and chances of stagflation are the reason for gold price trading over $1,900.”  

Gold prices traded lower for part of the session after Federal Reserve Chairman Jerome Powell said inflation is “much too high” and left the door open for more than one interest-rate hike of more than 25 basis points this year. Following Powell’s comments, “the major indices took a quick nosedive while the dollar found support and gold eased off its earlier highs, as yields soared,” said Fawad Razaqzada, market analyst at ThinkMarkets.  

The Fed has already signaled a “much stronger appetite to combat inflation, indicating a further six rate increases in 2022, but judging by Powell’s latest comments and those from some of the Fed officials, there is a good possibility that we may even see a 50 basis point increase in May,” said Razaqzada, in a market update. Gold futures for April delivery on Comex edged up less than 0.1%, to settle at $1,929.50 an ounce.


Oil Futures

Oil prices posted their highest finish in almost two weeks, as European Union foreign ministers considered a ban on Russian energy as punishment over that country’s nearly monthlong invasion of Ukraine. The potential for the EU to expand sanctions to Russian energy has “sparked a bullish leg” for oil, analysts at Blue Line Futures told clients in a note Monday. Support for an EU-wide ban on the purchase of Russian oil is growing inside the bloc, The Wall Street Journal reported, citing diplomats involved in the discussion. West Texas Intermediate crude for April delivery climbed 7.1% to settle at $112.12 a barrel on the New York Mercantile Exchange. May Brent crude also rose 7.1%, settling at $115.62 a barrel on ICE Futures Europe.



Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1065 to lows near US$1.1010 and was near US$1.1015 at the US close. The Aussie
dollar rose from lows near US73.73 cents to highs near US74.20 cents and was near US74.00 cents at the US close. And the Japanese yen eased from near 119.09 yen per US dollar to JPY119.48 and was near session lows at the US close.


European Markets

European sharemarkets were mixed on Monday. Investors balanced a lift in oil prices with ongoing fighting in the Ukraine war. European leaders mulled an oil embargo with Russia, ahead of talks
with the US President. The pan-European STOXX 600 index was flat. The German Dax index fell by 0.6%. But the UK FTSE index lifted 0.5%, underpinned by gains in oil producers. Shares in BP and Shell each gained 4.1%. In London trade, shares in Rio Tinto rose by 3.3% and BHP shares gained 5.0%.


Asian Markets

Earlier Monday, Chinese stocks extended a recovery that started last week amid signs of easing U.S.-China tensions over Russia’s invasion of Ukraine. The benchmark Shanghai Composite Index edged up 0.1%, while the Shenzhen Composite Index rose 0.7%. The tech-heavy ChiNext Price Index gained 0.5%. Drug makers led the upturn as the sector extended Friday’s gains, after several Chinese pharmaceutical companies received licenses to develop generic versions of Pfizer’s oral Covid-19 drug nirmatrelvir.

Hong Kong’s Hang Seng Index reversed early gains, settling 0.9% lower, thanks to profit taking, KGI Securities said. The brokerage said it expects investors to continue to focus on companies reporting financial results during the week. The Hang Seng Tech Index also gave up early gains to decline 1.5%. Property-related stocks also declined.

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