Global Fundamental Analysis 08/04/2022

Australian Market

Australia’s S&P/ASX 200 gave back 0.6% as weakness in technology stocks continued to weigh on the benchmark. At the same time, Australia’s February trade surplus for February contracted more than expected due to a surge in imports. The technology sector dropped 3.4%, while consumer discretionary stocks lost 1.6%.

US Market 

U.S. stocks rose as investors digested the possibility of more aggressive monetary tightening by the Fed and monitored the war in Ukraine. Stocks moved into the green in the afternoon, but were down for much of the day. The S&P 500 gained 0.4%. The technology-focused Nasdaq Composite Index ticked about 0.1% higher, while the Dow Jones Industrial Average rose 0.3%. Eight of the S&P 500’s sectors were positive, with consumer staples leading the advancers.  

“I guess we have a little bit of a hangover from the FOMC minutes,” said Oanda analyst Edward Moya. Investors are trying to get a better sense of where the economy goes and how that affects the Fed’s monetary policy, he said.

Commodities

Gold futures posted their first gain in three sessions to log their highest settlement in a week. The value of the precious metal has been determined by “countering forces,” said Ricardo Evangelista, senior analyst at ActivTrades. On one side, there’s the “the geopolitical risk generated by the war in Ukraine, which enhances gold’s haven appeal,” and on the other, “the increasingly hawkish stance of the U.S. Federal Reserve, which is capping gold gains due to the inverted correlation with the U.S. dollar, ” he said. Gold futures for June delivery rose 0.8% to settle at $1,937.80 an ounce on Comex – the highest most-active contract finish since March 31, FactSet data show.

Oil Futures

Oil futures suffered a third straight loss, with global Brent crude prices briefly dipping under $100 a barrel for the first time in three weeks, a day after the announcement of a coordinated release of crude from strategic reserves by member countries of the International Energy Agency. Natural-gas futures, meanwhile, marked their highest finish since December 2008, buoyed by tight supplies as a rise in coal prices lifted demand for the energy source.  

The IEA announced a coordinated release of 120 million barrels of crude, half of which would come from the U.S. as part of that country’s previously announced 180 million barrel release over the next six months. “These volumes are significant, but still fall short of the 2 [million barrels a day] of Russian losses that we estimate due to self-sanctioning,” said Warren Patterson, head of commodities strategy at ING, in a note.  

Overall, analysts across the oil industry are torn over whether the coordinated release from global reserves will “sustain the oil market,” or if it will allow the Organization of the Petroleum Exporting Countries to further delay an output increase that would truly drive down prices long term, wrote analysts on StoneX’s energy team in Kansas City. West Texas Intermediate crude for May delivery lost 0.2% to settle at $96.03 a barrel on the New York Mercantile Exchange. June Brent crude declined by 0.5%, closing at $100.58 a barrel on ICE Futures Europe. May natural gas rose 5.5% to $6.359 per million British thermal units, the highest front-month finish since December 2008.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.0866 to highs near US$1.0934 and was near US$1.0870 at the US close. But the
Aussie dollar fell from highs near US74.91 cents to lows near US74.65 cents and was near US74.75 cents at the US close. And the Japanese yen firmed from 123.59 yen per US dollar to near JPY124.00 at the US close.

European Markets

European sharemarkets closed lower on Thursday. The panEuropean STOXX 600 index slid by 0.2% with insurance stocks down 1.2%. Minutes of the March 10 European Central Bank (ECB)
meeting showed that policymakers appeared keen to roll back monetary stimulus amid high inflation. The German Dax and UK FTSE indexes both dipped 0.5%. In London trade, shares of Rio Tinto (-0.3%) and BHP (-0.7%) both fell.

Asian Markets

Earlier Thursday, China stocks lost ground, extending a muted showing since the market resumed trading after a two-day holiday earlier this week. The benchmark Shanghai Composite Index fell 1.4%, while the Shenzhen Composite Index shed 1.9%. The ChiNext Price Index was the worst performer with a 2.1% decline. The property sector led the downturn amid weak March sales data.  

Hong Kong’s benchmark Hang Seng Index retreated 1.2%. Consumer companies led losses, with restaurant operator Haidilao falling 7.2% and Budweiser Brewing down 3.8%. Tech stocks further weighed on the market amid profit-taking. The Nikkei Stock Average dropped 1.7% amid concerns over the Fed’s tightening pace and higher corporate-borrowing costs. Aviation stocks fell, with Japan Airlines declining 2.6% and ANA Holdings slipping 2.0%.