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The dollar rose and stocks fell as extreme moves in commodity prices drove Asian markets and US and European futures sharply lower.
The S&P/ASX 200 fell 72 points or 1.02 per cent to its lowest close in more than a week.
Strong gains in oil producers and gold miners helped shield the market from a deeper fall. Banks, industrials and growth stocks were amongst those hardest hit.
What moved the market
A sharply divided market finished with vastly more losers than winners as wild gyrations on commodity markets stoked fears of either a global recession or stagflation. Strong domestic economic data failed to change the broader narrative.
Stocks tumbled as crude oil briefly jumped 18 per cent when trade started this morning. Nickel surged almost 19 per cent. Wheat traded “limit up” in the US. Havens soared. Gold cracked US$2,000 an ounce.
Brent crude surged 18 per cent to US$139.13 a barrel after the White House said it was considering an embargo on Russian oil. The international oil benchmark later tempered its rise to US$12.18 or 10.3 per cent at US$130.23 a barrel, but the damage had been done.
S&P 500 futures skidded 56 points or 1.3 per cent. Pan-European Stoxx futures fell 2.4 per cent.
In Asia, the Asia Dow lost 3.14 per cent, Hong Kong’s Hang Seng 3.41 per cent, Japan’s Nikkei 3.21 per cent and China’s Shanghai Composite 1.48 per cent.
While commodity producers rub their hands at record prices for copper, aluminium and palladium, many economists fear the commodities price shock will stop the post-pandemic global economic rebound in its tracks. The worst-case scenario is a period of “stagflation” – when inflation pushes prices higher while growth stalls.
“For the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war,” Ed Yardeni, president of Yardeni Research, wrote in a note. “For stock investors, we think 2022 will continue to be one of this bull market’s toughest years.”
The ANZ China Commodity Index last week recorded its biggest gain on record, climbing 17.4 per cent. Bloomberg’s commodity index touched a seven-and-a-half year high.
Another round of strong domestic data helped the dollar but left risk-averse equity investors unmoved. The Aussie pushed above 74 US cents for the first time since November, lately trading 0.3 per cent ahead at 74.16 US cents.
Australia’s services sector expanded strongly last month, according to today’s Australian Industry Group survey. The performance of services index improved 3.8 points to 60, well above the 50-point level that divides expansion from contraction.
A separate report showed job advertising bounced 8.4 per cent to a pandemic-era high, signalling strong demand from employers.
Winners’ circle
Commodity producers filled all the slots at the top of the ASX 200. In the energy space, Woodside Petroleum soared 9.52 per cent, Santos 5.28 per cent and Beach Energy 6.31 per cent.
Gold miners dominated the top ten as the precious metal cracked US$2,000 an ounce. The yellow metal was lately ahead US$28.70 or 1.46 per cent at US$1,995.30 an ounce after trading as high as US$2,005.20.
Ramelius Resources put on 6.78 per cent, Gold Road Resources 6.6 per cent and Northern Star 6.13 per cent. Newcrest gained 5.19 per cent and Silver Lake Resources 6.04 per cent.
Uranium miners rebounded from Friday’s plunge when a Russian attack briefly triggered fears of a Chernobyl-like meltdown at Europe’s largest nuclear power plant. Deep Yellow bounced 8.97 per cent, Bannerman Energy 11.9 per cent and Peninsula Energy 10.81 per cent.
GrainCorp shrugged off a broker downgrade from Bell Potter. The agribusiness climbed 1.04 per cent to a new record, supported by the scramble to replace Russian and Ukrainian grain. Wheat hit limit up on the Chicago exchange again this morning.
South32 claimed a fresh all-time high with a gain of 3.68 per cent after announcing the sale of its Metalloys manganese alloy smelter in South Africa to a Russian firm will not proceed.
Index heavyweights BHP and Rio Tinto scaled fresh seven-month highs. BHP gained 0.88 per cent. Rio gave up early gains, falling 0.46 per cent. Fortescue Metals put on 1.77 per cent.
Doghouse
AGL Energy slid 1.75 per cent after rejecting an improved takeover offer from Atlassian billionaire Mike Cannon-Brookes and Canadian asset manager Brookfield. AGL’s board said the revised unsolicited and non-binding indication of interest of $8.25 per share still undervalued the energy firm. The company intends to split in two later this year.
AGL Energy Chairman Peter Botten said, “The Revised Unsolicited Proposal continues to ignore the opportunity that AGL Energy shareholders have through our proposed demerger to realise potential future value.”
The share price declined after Cannon-Brookes threatened to abandon his bid to buy the utility and close its coal-fired power stations ahead of schedule. The tech entrepreneur said the consortium was “putting our pens down – with great sadness”.
Qantas and other travel companies wilted under the prospect of increased travel costs. The airline’s shares dived 7.93 per cent. Flight Centre skidded 4.16 per cent, Corporate Travel Management 2.87 per cent and Webjet 2.84 per cent.
Growth stocks bore the brunt of the selling. Block gave up 10.25 per cent, Imugene 8.16 per cent and PointsBet 8.02 per cent. Europe-facing retail group Unibail-Rodamco-Westfield shed 9.46 per cent.
Also weighing were companies trading ex-dividend. CSL eased 3.34 per cent, Bendigo Bank 5.31 per cent, QBE 5.97 per cent and Ramsay Health Care 4.34 per cent.
