Global Fundamental Analysis 23/11/2021

Global Fundamental Analysis 23/11/2021, FP Markets

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

U.S. stocks retreated late in the session after trading higher for most of the day following the announcement of Fed Chairman Powell’s nomination for a second term as head of the central bank. The yield on the 10-year Treasury extended its recent gains on the news to 1.63%. The WSJ Dollar Index rose to 90.16, dragging gold prices lower. Oil prices advanced on speculation about OPEC’s response amid plans for releases of strategic reserves to combat price inflation globally.

Australian Market

Australia’s S&P/ASX 200 lost 0.6%, dragged by major banking stocks. The benchmark followed a negative lead by U.S. stocks amid concerns over the potential impact of renewed Covid-19 restrictions on the global economic recovery. Travel stocks were also weak, even as Australia announced it would reopen its border to skilled workers and some tourists from December 1. Tech was the worst-performing sector, losing 2.1%.

US Market

The S&P 500 pared gains and finished lower after news that President Biden would nominate Jerome Powell for a second term as chairman of the Federal Reserve, paving the way for the continuation of the current policy framework. The decision, revealed before the stock market opened, ended a guessing game over who would lead the Fed during a period in which the central bank is expected to unwind coronavirus-era stimulus measures. The Fed this month approved plans to scale back its bond-buying program, and elevated inflation has prompted market participants to expect higher interest rates next year.  

The S&P 500 slipped 0.3%, while the Dow Jones Industrial Average advanced less than 0.1%. The tech-heavy Nasdaq Composite Index lost 1.3%. Stocks have benefited from stimulus the Fed, under Mr Powell, has lavished on the economy since the early days of the pandemic. Mr Powell’s nomination “keeps monetary policy relatively stable and takes one of the potential catalysts for disruption off the table,” said Jason Pride, a chief investment officer of private wealth at Glenmede.



Gold futures skidded lower, registering their steepest daily decline in more than three months amid a rally in Treasury yields and a strengthening of the U.S. dollar to kick off a holiday-shortened Thanksgiving week. U.S. markets will be closed on Thursday in observance of Thanksgiving and will end early the Friday after the holiday. The slump for gold followed the White House’s announcement that President Joe Biden had nominated Jerome Powell to a second four-year term as Fed chairman, and named Fed Gov.

Lael Brainard to serve as the central bank’s vice chairwoman. Shaking off Covid-related unrest in Europe, December gold futures traded down 2.4% to settle at $1,806.30 an ounce, marking the sharpest percentage drop since Aug. 6, while pushing the precious metal to the lowest level since Nov. 4, FactSet data show. Strategists noted the bullion collapsed through technical values at around $1,835, viewed as a key support threshold for the metal, which may have helped to accelerate selling.


Oil Futures

Oil futures settled higher, lifted by a news report that said the Organization of the Petroleum Exporting Countries and its allies could rethink plans to continue with modest output increases if the U.S. and other energy-consuming countries follow through on plans to release crude from strategic reserves. Meanwhile, President Joe Biden could announce a release from the U.S. Strategic Petroleum Reserve alongside other countries as early as Tuesday, Bloomberg reported.  

West Texas Intermediate crude for January delivery rose 1.1% to close at $76.75 a barrel on the New York Mercantile Exchange. January Brent crude, the global benchmark, gained 1% to settle at $79.70 a barrel on ICE Futures Europe. Both benchmarks fell sharply last week, logging a fourth straight week of declines to end at seven-week lows. “In my opinion, an SPR release would likely suck maybe a dollar or two out of the market. It is possible a U.S. SPR draw is already in the market,” said Robert Yawger, director of energy futures at Mizuho Securities, in a note.



Major currencies were weaker against the US dollar in European and US trade. The Euro fell from US$1.1285 to lows near US$1.1235 and was near session lows in afternoon US trade. The Aussie dollar fell from highs near US72.70 cents to lows near US72.20 cents and was near the lows in afternoon US trade. And the Japanese yen eased from 114.05 yen per US dollar to JPY114.92 and was near weakest levels in afternoon US trade.


European Markets

European sharemarkets were mixed on Monday. Investors digested Germany’s warning of tighter lockdown restrictions. Investors also responded to news that Telecom Italia had received a $12-billion proposal from U.S. fund KKR to take Italy’s largest phone group private. The pan-European STOXX 600 index fell by 0.1%. The German Dax index lost 0.3%. But UK FTSE index rose by 0.4%. In London trade, shares in Rio Tinto rose 1.9% and BHP rose 3.1%.


Asian Markets

Earlier Monday, Chinese stocks advanced amid gains from baijiu and automakers. Chinese equities are appealing as they will likely prove defensive in any Fed-tightening-triggered selloff, Jefferies said. “China is at a different point in the cycle from the G7 countries since China has been tightening for the past year and is only starting to ease, ” the firm said. The Shanghai Composite Index rose 0.6%, the Shenzhen Composite Index advanced 1.4% while the ChiNext Price Index gained 2.5%.  

Hong Kong’s Hang Seng Index shed 0.4%, dragged by the tech sector, while electronics and automakers gained. Chinese tech majors were broadly lower after the State Administration of Market Regulation said it had fined a handful of companies for failing to disclose M&A deals. The Nikkei Stock Average ticked up 0.1%, helped by gains in shipping stocks. Positive sentiment over strong logistics demand ahead of the festive season helped support shipping shares. Developments relating to Japan-China relations will be in focus after the Japanese Foreign Minister said on Sunday that his Chinese counterpart has invited him for an official visit. The market will be closed for a public holiday on Tuesday.

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