Global Fundamental Analysis 20/12/2021

Australian Market

Australia’s S&P/ASX 200 index closed 0.1% higher, paring its weekly losses on gains by commodity and financial stocks. Shares of gold miners jumped following a rise in the price of the yellow metal, while big banks NAB, Westpac, ANZ and Commonwealth gained between 0.3% and 2.4%. Investors dumped tech stocks, mirroring a selloff of the sector in the U.S., with buy-now-pay-later providers negatively affected following the Biden administration’s announcement of an inquiry into the industry. The ASX 200 lost 0.7% for the week.

Stocks turned in a weak session as investors assessed the potential impact of policy shifts by the world’s largest central banks on inflation and growth. The S&P 500 fell 1%. The Dow Jones Industrial Average weakened 1.5% and the Nasdaq Composite Index pared earlier losses and finished the day down about 0.1%. Markets have been dragged down toward the end of the week by concerns about the possibility of higher interest rates in the future.

Shortly after the Federal Reserve announced Wednesday its plan to speed up the tapering of its pandemic-era stimulus measures and possibly raise interest-rate increases next year, equities had rallied. “People are scratching their heads and wondering ‘Wow, was the post-Fed meeting reality just a complete head fake?’,” said Jordan Kahn, chief investment officer of ACM Funds.

Commodities

Gold futures climbed back above the $1,800 mark to post their highest settlement in nearly four weeks. February gold rose 0.4% to settle at $1,804.90 an ounce, with most-active contract prices scoring a weekly rise of 1.1%. Prices settled at the highest since Nov. 22, FactSet data show. The precious metal’s rise appears to be driven by “broad capital flows leaving risk markets … and moving into defensive havens,” such as gold, said Colin Cieszynski, chief market strategist at SIA Wealth Management.

Oil Futures

Oil futures fell to suffer their seventh weekly loss in eight weeks, with weakness tied to worries about the spread of the Omicron variant and its potential impact on fuel demand. West Texas Intermediate crude for January delivery fell 2.1% to settle at $70.86 a barrel on the New York Mercantile Exchange, pulling the U.S. benchmark down by 1.1% for the week, according to Dow Jones Market Data. February Brent crude, the global benchmark, lost 2% at $73.52 a barrel on ICE Futures Europe, for a 2.2% weekly decline. “Omicron concerns are raising the prospect of reduced travel and movement,” said Edward Meir, analyst at ED&F Man Capital Markets, in a note.

Forex

Major currencies were mostly weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1345 to lows near US$1.1235 and was near the lows at the US close. The
Aussie dollar fell from highs near US71.75 cents to lows near US71.25 cents and was near the lows at the US close. And the Japanese yen eased from 113.15 yen per US dollar to JPY113.76 and was near JPY113.67 at the US close.

European Markets

European sharemarkets were generally lower on Friday with banks and luxury stocks leading the declines. But travel & leisure rose 2.3%, leading the gains. The pan-European STOXX 600 index
lost 0.6% on Friday and lost 0.3% on the week. The German Dax index fell by 0.7% after a survey of business morale fell for a sixth straight month. But the UK FTSE index rose by 0.1%, underpinned by miners and retailers. In London trade, shares in Rio Tinto fell by 0.1% while BHP rose 0.3%.

Asian Markets

Japan’s Nikkei Stock Average declined 1.8%, dragged by falls in electronics and pharmaceutical stocks, as the Bank of Japan joined other major central banks in trimming policy stimulus that had helped boost stocks globally during the Covid-19 pandemic. Chinese shares closed lower along with other Asian markets, reflecting a flurry of major central banks around the world taking steps to tighten monetary policy.

The Shanghai Composite Index was 1.2% lower, the Shenzhen Composite Index fell 1.4% and the ChiNext Price Index was off 1.6%. Concerns over the Biden administration’s recent move to add 34 Chinese targets to its banned entity list also weighed on sentiment. Auto stocks were lower.