Global Fundamental Analysis 07/07/2022

Australian Market

Australia’s S&P/ASX 200 index closed 0.5% lower as weakness in mining and energy stocks dragged on the market. Materials and energy sectors dropped 5.0% and 5.8%, respectively, on falling commodity and iron-ore prices. BHP lost 5.6%, while Rio Tinto was 7.3% weaker. Oil producer Woodside declined 6.9% and Beach Energy fell 8.0%.

Gold miners St. Barbara shed 9.5% and Regis Resources fell 6.9%. The major banks closed between 0.9% and 1.8% higher after some lenders raised rates in line with the Reserve Bank of Australia, which on Tuesday delivered its second consecutive 50-basis-point interest-rate rise. Technology and property trusts were the best-performing sectors, adding 3.1% and 3.2%, respectively.

US Market 

U.S. stocks edged higher after minutes from the Federal Reserve were released and investors started looking for insights into the state of the economy and the central bank’s efforts to tame inflation through interest-rate increases. The S&P 500 and Nasdaq Composite Index each were up 0.4%. The Dow Jones Industrial Average picked up 0.2%.  

Fed officials concluded at their meeting last month that they needed to pick up the pace of interest-rate increases because of an increasingly worrying inflation outlook. Some investors believe that signals the Fed will stick with previously telegraphed plans to keep raising rates – and they worry that will tip the economy into a recession.

Commodities

Gold futures marked a seventh-straight session decline, with prices settling at their lowest in more than 21 months as the U.S. dollar marched higher. August gold lost nearly 1.6% to settle at $1,736.50 per ounce, the lowest level for a most-active contract since September 2021. Gold’s seven-session drop marked the longest consecutive decline since the seven-session fall ended March 5, 2019, according to Dow Jones Market Data.

Oil Futures

Oil futures ended lower, with ongoing worries about a recession that would hurt energy demand helping to send U.S. prices into a bear market – defined by a 20% or more drop from their recent high. West Texas Intermediate crude for August delivery fell 1% to settle at $98.53 a barrel on the New York Mercantile Exchange, the lowest front-month finish since April. Prices ended a bit more than 20% below the recent settlement high of $123.70 set on March 8, according to Dow Jones Market Data.

September Brent crude, the global benchmark, lost 2% to settle at $100.69 a barrel on ICE Futures Europe after touching a low of $98.50 – slipping under the $100 mark for the first time since April. The move was attributed to growing fears that aggressive monetary tightening by the Federal Reserve and other major central banks in response to persistently high inflation could send the U.S. and global economy into recession

Forex

Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0270 to US$1.0160 and was near US$1.0180 at the US close. The Aussie dollar fell from near US68.25 cents to near US67.60 cents and was near US67.80 cents at the US close. And the Japanese eased from 135 yen per US dollar to near JPY136 and was around JPY135.85 at the US close.

European Markets

European sharemarkets were firmer on Wednesday after Norwegian oil workers ended their strike, easing supply concerns. Shares in Just Eat Takeaway.com rose by 15.5% after Amazon agreed to buy a stake in its Grubhub business. While sharemarket gains were generally broad-based, the energy sector fell by 1.5%. The pan-European STOXX 600 index rose by 1.7%. The German Dax index rose by 1.6% and the UK FTSE index rose by 1.2%. In London trade, shares of Rio Tinto rose by 1.0% but shares in BHP fell by 0.4%.

Asian Markets

Earlier, in Asia, Japan’s Nikkei Stock Average closed 1.2% lower, dragged by sharp falls in energy and financial stocks, as concerns persisted about the global economic outlook and the impact of fast policy tightening in many parts of the world. Oil explorer Inpex lost 10% and Dai-ichi Life Holdings dropped 5.6%. Chinese stocks ended lower as a rise in Covid-19 cases in parts of the country sparked renewed lockdown fears.

The Shanghai Composite Index fell 1.4%, the Shenzhen Composite Index dropped 1.2%, and the ChiNext Price Index slipped 0.8%. Energy stocks were lower after oil prices slumped overnight on fears of a recession. China Oilfield Services fell 4.5%, PetroChina lost 3.3% and Cnooc Energy Technology & Services slipped 1.5%.