Global Fundamental Analysis 26/01/2022

Global Fundamental Analysis 26/01/2022, FP Markets

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

U.S. stocks fell but again pared losses from earlier in the session. The yield on the 10-year Treasury rose to 1.78%, after another turbulent trading session. The WSJ Dollar Index edged higher to 89.71. U.S. oil prices jumped as geopolitics outweighed a bearish shift in fundamentals. Gold prices rose as investors sought safety from volatility in equities.

Australian Market

Australia’s S&P/ASX 200 slipped 2.5% to its lowest level in around eight months, driven by declines in energy and technology stocks. All sectors finished in the red. The heavyweight financial sector lost 2.7%, while the materials sector fell 3.0%. Australia’s major banks closed between 2.0% and 3.6% lower.

US Market

Major U.S. indexes pared some of their earlier losses in the afternoon in another wild trading session as investors awaited the Federal Reserve’s policy meeting and parsed a docket of earnings. The S&P 500 fell 1.2%, while the technology-heavy Nasdaq Composite lost 2.3%. The blue-chip Dow Jones Industrial Average finished lower by 0.2%. The moves follow a jarring intraday reversal Monday, when major indexes clawed back losses to post a big comeback. The Dow reversed losses of more than 1000 points for the first time in history. After falling more than 4% in intraday trading, the Nasdaq recorded its biggest reversal since 2008.  

Some portfolio managers said that they had used the punishing January selloff to find bargains and add to their stockholdings. For the second consecutive day, major indexes pared big losses late in the trading session, leaving some traders bewildered. “It is encouraging that the market seems to be trying to find a floor here,” said Ryan Jacob, chief investment officer at Jacob Asset Management. “You get this kind of action when you near a market bottom.”



Gold futures settled at their highest price in more than two months, finding support as U.S. stock indexes fell a day ahead of the Federal Reserve’s announcement on monetary policy. Prices for the haven metal also climbed as the International Monetary Fund cut its forecast for global economic growth this year on the back of weaker outlooks for China and the U.S. This week, gold has drawn safe-haven bids amid wild swings in values for stocks and geopolitical tensions in Europe, where there are fears about the annexation of Ukraine by Russia.  

“Investors should not forget that increased equity market volatility, if it lasts long enough, at some point triggers a capitulation of gold buyers,” wrote Alex Kuptsikevich, a senior financial analyst at FxPro, in a daily note. February gold futures rose 0.6% to settle at $1,852.50 an ounce, following a 0.5% climb on Monday. The settlement was the highest for a most-active contract since Nov. 18, FactSet data show.


Oil Futures

Oil futures recouped their losses from a day earlier and then some, as tensions between Russia and NATO over Ukraine fed global supply concerns. The move up for oil also came against a background of volatility in global equity markets as traders awaited the Federal Reserve’s policy decision. “The market remains fundamentally bullish and conflict with Russia does nothing to alleviate supply-side pressures,” said Pratibha Thaker, editorial director, Middle East and Africa, at the Economist Intelligence Unit.  

“Tensions are seriously heightened between Russia and the West and if there is an invasion of Ukraine when energy markets are already so tight, the additional risk premium should continue to support prices and push it even higher,” she said. West Texas Intermediate crude for March delivery rose nearly 2.8% to settle at $85.60 a barrel on the New York Mercantile Exchange. March Brent crude, the global benchmark, climbed 2.2% to settle at $88.20 a barrel on ICE Futures Europe.



Major currencies were generally firmer against the US dollar in European and US trade. The Euro fell from near US$1.1335 to US$1.1290 but was back near US$1.1320 in late US trade. The Aussie dollar fell from highs near US71.80 cents to US70.90 cents was near US71.40 cents in late US trade. And the Japanese yen fell from near 113.47 yen per US dollar to JPY113.98 and was near JPY113.95 in late US trade.


European Markets

European sharemarkets slumped on Monday with investors citing fears of a Russian attack on Ukraine and uncertainties about this week’s meeting of US Federal Reserve policymakers. The travel & leisure sector fell by 5.4% and technology fell by 5.8%. The panEuropean STOXX 600 index fell by 3.8% – the worst day since June 2020. The German Dax index also fell by 3.8%. And the UK FTSE index fell by 2.6%. UK markets were supported by a 4.5% lift in shares of Vodafone and 7.3% lift in Unilever. In London trade, shares in Rio Tinto fell by 3.5%. Shares in BHP fell by 3.7%.


Asian Markets

Earlier Tuesday, Chinese stocks slumped on broad-based declines, tracking weakness in regional equities. Expectations that liquidity will tighten in global markets and a sharp drop in the Nasdaq Composite recently may have some near-term impact on the A-share market, China Galaxy Securities said. Heavily sold-off sectors included coal miners, pharma and auto makers. The Shanghai Composite Index retreated 2.6%, its worst day in more than a year. The Shenzhen Composite Index dropped 3.3% and the ChiNext Price Index lost 2.7%.  

Hong Kong’s Hang Seng Index fell 1.7%, weighed by broad declines across sectors ahead of the U.S. Federal Reserve meeting. Property stocks were lower. China Evergrande sank 6.5% after saying it has started talks with offshore creditors. Some overseas debt holders had threatened to enforce legal rights against China Evergrande. Japanese stocks were dragged lower by sharp drops in e-commerce, shipping and electronics stocks, as concerns persisted over the Fed’s tightening. Rakuten Group dropped 7.5%, major shipper Nippon Yusen shed 5.9% and Renesas Electronics fell 5.9%. The Nikkei Stock Average closed 1.7% lower.

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