Global Fundamental Analysis 21/12/2021

Australian Market

Australia’s S&P/ASX 200 index closed 0.2% lower, dragged down by financial and energy stocks. Most financial stocks slipped as the number of new Covid-19 cases in the country continued to surge, adding to fears about the potential economic impact of the Omicron variant.

The Dow Jones Industrial Average fell more than 600 points before recovering a bit as investors worried that a rise in Omicron Covid-19 cases would stall economic growth and add pressure to inflation. The DJIA wrapped up trading with losses of about 1.2%. The decline was the index’s third straight and followed a 1.5% drop on Friday. The S&P 500 slid 1.1%, while the technology-focused Nasdaq Composite lost 1.2%.  

“We’re really seeing Omicron spread like wildfire, and it’s weighing on sentiment, “said Esty Dwek, chief investment officer at FlowBank. “You’re seeing lockdowns instigated in Europe. You’re seeing more and more restrictions and the number of cases is going up so much that even if it’s less severe it could lead to more hospitalizations.”

Commodities

Gold futures closed lower, with the precious metal hit by the prospects for higher interest rates – something that was hurting appetite for equities and precious metals alike, in the short term. February gold settled 0.6% lower at $1,796.40 an ounce. “The lack of upside impetus also suggests that a lot of today’s risk-off moves are being driven by a lack of liquidity, more than any undue pessimism about future economic prospects,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a daily note.

Oil Futures

Oil futures fell sharply, but ended off session lows, as the spread of the Omicron variant and the imposition of new mobility restrictions in parts of the world amplified worries about demand. West Texas Intermediate crude for February delivery, the most actively traded U.S. contract, ended the day down 3% at $68.61 a barrel on the New York Mercantile Exchange. February Brent crude, the global benchmark, lost 2.7% to settle at $71.52 a barrel on ICE Futures Europe, following last week’s 2.2% weekly decline. 

Forex

Major currencies were mostly stronger against the US dollar in European and US trade. The Euro rose from lows near US$1.1245 to highs near US$1.1303 and was near US$1.1275 at the US close. The Aussie dollar lifted from lows near US70.82 cents to highs near US71.27 cents and was near US71.10 cents at the US close. But the Japanese yen eased from 113.33 yen per US dollar to JPY113.72 and was near JPY113.65 at the US close.

European Markets

European sharemarkets ended lower on Monday as the rapid spread of the Omicron Covid-19 variant triggers tighter government restrictions across the continent. The Netherlands entered a lockdown on Sunday. The pan-European STOXX 600 index lost 1.4% with mining and auto sector stocks both down by 2.5%. The German Dax index slid by 1.9% and the UK FTSE index lost 1%. In London trade, shares in Rio Tinto fell by 2.4% and BHP shares shed 1.5%.

Asian Markets

Japan’s Nikkei Stock Average closed 2.1% lower, weighed by growing concerns that the spread of the Covid-19 Omicron variant could hurt the global economic recovery. Oil stocks were among the worst performers, on worries about demand following Europe’s tightened measures in response to a surge in Omicron cases.  

Chinese shares closed lower, as a move by the country’s central bank to trim the one-year loan prime rate by 5 basis points didn’t lift sentiment for long. Concerns about the Omicron variant are mounting, and the Biden administration’s $2 trillion spending package appears doomed after a key lawmaker opposed it. The Shanghai Composite Index slipped 1.1%, the Shenzhen Composite Index lost 1.8%, and the ChiNext Price Index was 3.0% lower.