Global Fundamental Analysis 06/12/2021

Australian Market

Australia’s S&P/ASX 200 climbed 0.2% higher but still posted a fourth straight weekly loss. The heavyweight financial and materials sectors added 1.0% and 0.45%, respectively, helping offset losses among health and consumer stocks. The ASX 200 lost 0.5% for the week.

US Market

Markets ended a tumultuous week on an ominous note, with a broad technology-sector selloff sending the major U.S. stock indexes sharply lower and Treasury yields logging declines not seen since some of the worst days of the pandemic last year. After a relatively placid stretch across financial markets, investors were confronted with several fresh worries over the past week. Many investors are expecting the Federal Reserve to raise interest rates next year after a prolonged period of keeping interest rates near zero.  

The latest jobs figures highlighted how sluggish job growth has been even though the unemployment rate dwindled in November to the lowest level since February 2020, stoking a wild session of trading. The new variant has injected volatility into the stock market as investors were already weighing several other big risks such as inflation and the path of the economic recovery. “Omicron will absolutely affect growth in the next few months,” said Dev Kantesaria, founder of Valley Forge Capital.  

The Nasdaq ended the week with a 2.6% weekly loss, lagging behind its peers. The S&P 500 and Dow fell around 1.2% and 0.9%, respectively, this week. For the session, the S&P 500 lost around 0.8%, dragged down by shares of tech companies. The tech-focused Nasdaq Composite lost 1.9%. The Dow Jones Industrial Average fell 0.2%.

Commodities

Gold futures climbed, holding the bulk of their gains after U.S. jobs growth fell short of expectations, but prices ended a bit lower for the week a day after posting a more than seven-week low. November U.S. payrolls data showed a gain of 210,000 jobs, against expectations for a rise of 573,000. The jobless rate, however, fell to 4.2% from 4.6% and touched a new pandemic low.  

All in all, the mixed jobs report “won’t necessarily do anything to change the overall direction of FOMC policy,” said Chris Gaffney, president of World Markets at TIAA Bank. “An acceleration of the pace of the taper is still on the table, but today’s report will also encourage members to ‘wait and see’ future reports before discussing an acceleration of the expected hikes of interest rates in 2022.”The most active February gold futures contract rose 1.2% to settle at $1,783.90 an ounce. For the week, gold prices based on the most-active contract traded nearly 0.1% lower, according to Dow Jones Market Data.

Oil Futures

Oil futures ended on a mixed note, but both the U.S. and global benchmarks suffered their sixth weekly decline in a row – the longest streak of declines in three years – as the emergence of the Omicron variant of the coronavirus threatened the outlook for energy demand. Natural-gas futures, meanwhile, moved up for the session but suffered a nearly 25% drop for the week as forecasts for milder U.S. weather dulled prospects for heating demand.  

Crude-oil prices fell Friday, but settled above their intraday lows from Thursday, “after testing major technical support levels that have held throughout the past year,” said Troy Vincent, market analyst at DTN. This short term bounce “should not be taken as a sign the near-term bottom is truly in.”Against that backdrop, West Texas Intermediate crude for January delivery fell 0.4% to settle at $66.26 a barrel on the New York Mercantile Exchange, after touching a high at $69.22. February Brent crude, the global benchmark, tacked on 0.3% to end at $69.88 a barrel on ICE Futures Europe.

Forex

Major currencies were mostly lower against the US dollar in European and US trade. The Euro fell from highs near US$1.1330 to lows near US$1.1266 and was near US$1.1315 at the US close. The
The Aussie dollar fell from highs near US70.83 cents to lows near US69.94 cents and was near US70.00 cents at the US close. But the Japanese yen lifted from 113.60 yen per US dollar to JPY112.55 and was near JPY112.80 at the US close.

European Markets

European sharemarkets fell on Friday. The pan-European STOXX 600 index lost 0.6% to be down 0.3% for the week. Basic resources stocks dropped 2.5% on Friday as copper prices eased. The German Dax index also dipped 0.6%. And the UK FTSE index edged lower by 0.1% but was up 1.1% on the week. In London trade, shares in Rio Tinto fell by 3% and BHP shares slid 2.7%.

Asian Markets

Earlier Friday, Chinese stocks advanced, slightly picking up from the market’s muted performance so far this week. The benchmark Shanghai Composite Index rose 0.9%, while the Shenzhen Composite Index added 0.7%. The ChiNext Price Index, a measure for emerging industries and startups, edged 0.3% higher, after three consecutive sessions of losses.

Port operators and shipping firms led the upturn amid expectations of higher container freight rates due to tight cargo transportation capacity, which may be intensified by the new Covid-19 variant. Hong Kong’s Hang Seng Index slipped 0.1%, weighed by property stocks. Developers were heavily pressured by continuing concerns over the sector.

Tech stocks were also lower after a new rule was finalized overnight that would bring U.S. regulators closer to delisting foreign companies if they don’t open themselves to audits. The Nikkei Stock Average rose 1.0%, led by strong gains in airline and railway stocks, as investors trimmed bets against share declines ahead of U.S. jobs data. Local media reported that Merck applied for approval in Japan for its Covid-19 pill.