Global Fundamental Analysis 27/07/2021

Australian Market

Australia’s S&P/ASX 200 closed flat as gains among mining stocks offset weakness elsewhere. The index initially looked likely to build on a positive lead from U.S. stocks, but momentum stalled and the benchmark finished 0.1 points below Friday’s record close. Only the materials sector ended in positive territory.

U.S. stocks inched higher, surpassing last week’s records, ahead of a busy week of earnings from technology companies. The Dow Jones Industrial Average added 0.2% after the blue-chip index on Friday closed above the 35000 milestones for the first time. The S&P 500 rose 0.2% and the Nasdaq Composite advanced less than 0.1%. All three indexes closed at records Friday as well.  

Investors are awaiting earnings from a flurry of American companies including giant technology firms this week that will indicate how large businesses are weathering the pandemic and a recent uptick in inflation. Apple, Amazon.com and Google parent Alphabet are on deck later this week.

Commodities

Gold futures fell below the key $1,800 mark to finish at the lowest price in nearly three weeks, as investors prepared for this week’s meeting of Federal Reserve policy makers.  

Gold futures for August delivery edged down by 0.1% to settle at $1,799.20 an ounce on Comex. That was the lowest most-active contract settlement since July 6, FactSet data show. Gold prices had traded as high as $1,812 during the session, supported in part by weakness in the dollar, analysts said. 

Oil Futures

U.S. benchmark oil futures suffered their first loss in five sessions, but global benchmark crude prices ended with again, as traders weighed prospects for demand amid the spread of the Delta variant of the coronavirus that causes Covid-19. Reports of a crackdown by China on crude importers also contributed to price pressures, analysts said. “The spread of the Delta variant of Covid-19 and the rising number of new cases in many countries carries a wide range of concerns, including backtracking on a global rebound for crude product demand,” said Robbie Fraser, a global research and analytics manager at Schneider Electric.  

Still, “demand levels continue to show signs of resiliency and have bounced back quickly in some of the regions that were hardest hit earlier in the year,” he said. West Texas Intermediate crude for September delivery fell 0.2% to settle at $71.91 a barrel on the New York Mercantile Exchange. Prices for the front-month contract had posted gains in each of the last four trading sessions.  

September Brent crude, however, tacked on 0.5% to settle at $74.50 a barrel on ICE Futures Europe, stretching its streak of gains to a fifth-consecutive session.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro fell from lows near US$1.1770 to highs near US$1.1815 and was near US$1.1805 at the US close. The Aussie dollar rose from lows near US73.30 cents to US73.90 cents and was near US73.80 cents at the US close. But the Japanese yen eased from 110.10 yen per US dollar to JPY110.40 and was near the lows at the US close.

European Markets

European share markets were weaker on Monday. Gains in the travel & leisure sector were offset by declines by automakers. Shares in Dutch technology investor Prosus fell 8.8% on regulatory concerns with Chinese companies. The pan-European STOXX 600 index fell 0.1% from record highs. The German Dax index lost 0.3%. And the UK FTSE fell by just 2 points or less than 0.1%. In London trade, shares in both Rio Tinto and BHP gained 3.1%.

Asian Markets

Earlier Monday, Chinese stocks ended the session lower, extending last week’s downturn. The benchmark Shanghai Composite Index and Shenzhen Composite Index each lost 2.3%. The ChiNext Price Index, which measures the performance of emerging industries and startups, fell 2.8%. The consumer sector led the downturn, with education services providers slumping after Beijing released tough new regulations on the after-school tutoring industry. Food and beverage companies further weighed on the market.  

The Hang Seng Index fell 4.1%, its biggest one-day drop since May 2020, to settle at a year-to-date closing low, as concerns intensified over new rules for the tutoring sector. Tutoring firm New Oriental slumped 47% after a 41% decline on Friday. Its online education arm Koolearn Technology fell 33%, following a 28% dive on Friday.  

The Nikkei Stock Average rose 1.0%, led by gains in steel and electronics stocks, thanks partly to hopes for an earnings recovery. Earnings are in focus, as well as Covid-19 infection trends during the Tokyo Olympics.