Global Fundamental Analysis 23/08/2022

Australian Market

Australia’s S&P/ASX 200 lost about 1% with losses in all 11 sectors. The benchmark index is on a run of five straight weekly gains.

U.S. stocks fell as traders worried about further interest-rate increases and the backdrop of a slowing economy. The Dow Jones Industrial Average slid 1.9%. The S&P 500 dropped 2.1%, while the technology-focused Nasdaq Composite tumbled more than 2.5%. The declines came after U.S. stocks ended last week lower, snapping a four-week stretch of gains for the S&P 500. Stocks rose from July to mid-August on hopes that inflation had started to peak, which would allow the Federal Reserve to ease up on lifting rates, as well as on generally strong corporate earnings.

But Fed officials remained publicly hawkish, casting doubt on the strength of the midsummer rally. “The market got a little ahead of itself,” said Philip Blancato, chief executive of Ladenburg Thalmann Asset Management. “The market wants the Fed to sound off on the dovish standpoint, but the Fed’s not there yet.”

Commodities

Gold prices posted a sixth straight losing session — its longest losing streak since early July — as the rising dollar and higher Treasury yields continued to weigh on precious metals. Gold futures for December delivery declined by 0.8% to settle at $1,748.40 per ounce on Comex, the lowest most-active contract finish since July 27, FactSet data show.

Carlo Alberto De Casa, an external market analyst at Kinesis Money, said the dollar’s rebound over the past week has created a “challenging scenario for precious metals.” “If the dollar and Treasury yields continue to trend higher, it is only a matter of time before gold retests the 2022 lows,” analysts at Sevens Report Research wrote.

Oil Futures

U.S. crude-oil futures ended lower, but off the session’s lows on renewed worries about tight supplies. Natural-gas prices, meanwhile, climbed to a fresh 14-year high as fears about shortages in Europe also impacted the U.S. market. West Texas Intermediate crude for September delivery fell 0.6% to settle at $90.23 per barrel on the New York Mercantile Exchange after trading as low as $86.60. October Brent crude declined by 0.3% at $96.48 per barrel on ICE Futures Europe. September natural-gas prices rose 3.7% to $9.68 per million British thermal units, the highest front-month finish since July 2008, according to Dow Jones Market Data.

Crude-oil prices got “knocked down” over demand concerns, said Colin Cieszynski, chief market strategist at SIA Wealth Management. The People’s Bank of China cut its benchmark loan prime rate on Monday in a move to support its slowing economy, after it already lowered two other key policy rates last week. That raised concerns that “China could be falling into recession, and that other countries could eventually follow suit, which could reduce global demand” for oil, Cieszynski said.

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0040 to lows near US$0.9925 and was near US$0.9940 at the US close. The Aussie dollar fell from near US69.25 cents to US68.60 cents and was near US68.75 cents at the US close. And the Japanese yen eased from near 136.70 yen per US dollar to JPY137.60 and ended US trade near JPY137.45.

European Markets

European sharemarkets fell on Monday. Investors continued to fret about recession risks. Also there were worries about tightening gas supplies after energy giant Gazprom said that Russia will halt natural gas supplies to Europe for three days at the end of the month. Uniper, Germany’s top importer of Russian gas, declined 7.7% to hover near a record low. The pan-European STOXX 600 index lost 1.0%. The German Dax index fell by 2.3%. And the UK FTSE index fell by 0.2%. But in London trade, shares of Rio Tinto rose by 0.6% while shares in BHP rose by 1.7%.

Asian Markets

Earlier Monday, Chinese shares ended higher as sentiment was boosted by banks’ lowering of loan prime rates to support economic growth. Electric-car suppliers strengthened and coal miners also advanced amid a heatwave that has driven up power demand. The Shanghai Composite Index added 0.6%, the Shenzhen Composite Index increased 0.9% and the ChiNext Price Index gained 1.6%.  

Hong Kong’s Hang Seng Index fell 0.6%, as weakness in electronics stocks offset gains by sportswear makers and property developers. Japanese stocks were dragged lower by drops in electronics stocks, as caution persists over further tightening by the Fed and higher costs of borrowing. The Nikkei Stock Average fell 0.5%.