Global Fundamental Analysis 25/02/2022

Global Fundamental Analysis 25/02/2022, FP Markets

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

U.S. stocks rebounded from sharp early losses that briefly pushed the Nasdaq into bear market territory and the Dow Industrials into correction region. The 10-year Treasury yield closed little changed at 1.97%. The WSJ Dollar Index climbed to 90.43, but retreated from highs earlier in the session. U.S. oil prices rose modestly after prices had surged by more than 9% at one point to $100.54, which marked the first $100-plus price since 2014. Gold futures continued higher.

Australian Market

Australia’s S&P/ASX 200 gave back 3.0% as worries over the Ukraine crisis sent global equities tumbling. Every sector finished lower as losses accelerated through the day to leave the benchmark with its largest one-day percentage loss since September 2020.

US Market

U.S. markets whipsawed, jumping in response to the announcement of new sanctions against Russia after its missiles and airstrikes hit dozens of cities across Ukraine. The Dow Jones Industrial Average rose about 0.3%. The S&P 500, which reached correction territory earlier in the week, gained 1.5%. The Nasdaq Composite, which was earlier down more than 3%, climbed 3.3%. The Cboe Volatility Index rose to the highest level in over 15 months.  

U.S. indexes rose following an afternoon address by President Biden, who announced new sanctions on Russian elites and banks. Russian President Vladimir Putin’s “aggression in Ukraine will end up costing Russia dearly, economically and strategically,” said Mr. Biden. The invasion has heightened the pressure on a global economy already reeling from snarled supply chains and some of the highest inflation in years, with Europe likely to bear the brunt of the economic impact. Between high inflation, prospects of interest-rate increases and war in Europe, Fiona Cincotta, senior financial markets analyst at City Index, said: “It just seems like it’s too much for investors to be able to swallow right now.”



Gold futures climbed, with prices touching their highest intraday levels since September 2020, as Russia’s invasion ignited a flight to perceived havens. “Markets are in full risk-off mode,” and gold has broken out of a one-and-a-half year-long “bullish consolidation” and tested key resistance of $1,965 early in the session, said Paul Wong, market strategist at Sprott.  

“We continue to see gold as an under-owned safe-haven asset,” said Mr. Wong. “There was a significant reduction in investment in gold last year which is now in the process of reversing.” April gold futures rose 0.8% to settle at $1,926.30 an ounce, after touching a high of $1,976.50 – the highest for a most-active contract since September 2020, according to Dow Jones Market Data. The settlement was the highest since Jan. 5, 2021.


Oil Futures

Crude-oil futures settled higher, with both the U.S. and international benchmarks tapping intraday highs above $100 for the first time since 2014, as Russian troops and tanks pushed into Ukraine and airstrikes hit the country in an attack authorized by President Vladimir Putin. Analysts have said that the Ukraine conflict increases the risk of disruptions to Russian oil and natgas supplies and the sanctions and the effect of higher oil prices, could exacerbate global inflationary pressures.  

Stewart Glickman, energy equity analyst at CFRA Research, said his company believes President Biden has “little appetite for policy moves that would cause further pain at the pump for U.S. drivers.” So, there’s a risk of WTI prices overshooting the mark and settling back in the $90 range, and that would “reflect the existing tight market for crude, but would be absent sanctions that matter,” he said.  

West Texas Intermediate crude for April delivery rose 0.8% to settle at $92.81 a barrel on the New York Mercantile Exchange, well below the session’s high of $100.54. April Brent crude, the global benchmark, settled 2.3% higher at $99.08 a barrel on ICE Futures Europe after touching $105.79. Both international and U.S. contracts hit their highest intraday level since 2014.



Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1260 to lows near US$1.1109 and was near US$1.1205 in afternoon US trade. The Aussie dollar fell from highs near US72.00 cents to lows near US70.94 cents and was near US71.75 cents in afternoon US trade. And the Japanese yen fell from 114.40 yen per US dollar to
JPY115.62 and was near JPY115.60 in afternoon US trade.


European Markets

European sharemarkets fell on Thursday as investors responded to the invasion of Ukraine. Banks (down 8.2%) and automakers fell most although the oil and gas sector fell by only 0.3%. Shares in Societe Generale fell by 12.2%. Defence stocks rose with BAE Systems in the UK up by 5.2%. Renewable energy was another bright spot on markets. The pan-European STOXX 600 index fell by 3.3% to 9-month lows. The German Dax index lost 4.0% with the UK FTSE index lower by 3.9%. In London trade, shares in Rio Tinto fell by 1.8% and BHP fell by 7.0% (traded ex-dividend).


Asian Markets

Earlier Thursday, Chinese stocks ended the session sharply lower, following a broad selloff in Asian equities after Russia launched military action in Ukraine. The benchmark Shanghai Composite Index fell 1.7%, while the Shenzhen Composite Index lost 2.4%. The ChiNext Price Index also erased strong gains, ending 2.1% lower. While oil companies and related services providers rose sharply, the gains were more than offset by steep losses in most other sectors, especially consumer companies such as cinema operators and home-appliance makers.  

Hong Kong shares slumped amid a broad selloff in regional equities. Most sectors except energy ended weaker, with tech stocks among the top laggards. Chinese oil majors advanced, as crude prices topped $100 a barrel. The Hang Seng Index declined 3.2%, its biggest one-day percentage drop since September 2021. Japan’s Nikkei Stock Average fell 1.8% to its lowest level since November 2020. Losses on the Nikkei were broad-based, with SoftBank Group slipping 6.8%, AGC shedding 6.1% and Disco losing 5.7%.

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