Join our daily newsletter At The Bell to receive exclusive market insights
The ASX appeared set for a blistering start to the week following the Dow’s best session in more than a year.
Futures action suggested the S&P/ASX 200 would open 166 points or 2.39 per cent higher this morning.
However, a weekend of fast-moving events in the Ukraine crisis may undercut some of that exuberance. US and European equity futures retreated after President Vladimir Putin placed Russia’s nuclear weapons on high alert.
Wall Street
US stocks surged on Friday as panic selling after Russia’s invasion of Ukraine gave way to bargain-hunting. Speculation about peace talks added fuel to the rally. Also helping was a retreat in crude after international sanctions against Russia excluded energy exports.
The Dow Jones Industrial Average soared 835 points or 2.51 per cent, its best return since November 2020. The S&P 500 put on 96 points or 2.24 per cent. The Nasdaq Composite gained 221 points or 1.64 per cent.
Stocks hit multi-month lows the previous session as investors assessed the economic implications of the Russia-Ukraine crisis. The major indices ultimately reversed higher as investors “bought the dip”.
“You’re seeing follow-through today,” Jeff Kilburg, chief investment officer of Sanctuary Wealth, told CNBC. “We were in an oversold condition. There was an overreaction in the equity markets to the Ukraine crisis.”
All 11 US sectors rallied. The S&P 500 moved out of correction territory. Despite the gains, the Dow closed 0.1 per cent lower for the week. The S&P 500 and Nasdaq gained 0.8 and 1.1 per cent, respectively.
The mood deteriorated once again over the weekend after President Vladimir Putin placed Russia’s nuclear weapons on high alert. The US branded the move an “unacceptable escalation” of tensions. The announcement overshadowed news Ukraine and Russia will hold peace talks on the Ukraine-Belarus border.
Dow futures declined 1.2 per cent, according to IG Markets. European and Asian futures also fell. Germany’s DAX dropped 1.7 per cent and Hong Kong’s Hang Seng 1.2 per cent.
The ruble collapsed after the European Union banned all transactions with Russia’s central bank. The Australian dollar gapped down 0.59 per cent this morning to 71.63 US cents.
Australian outlook
Bright prospects dimmed somewhat over the weekend, but the session ahead should still offer solid gains. Risk-off moves over the weekend included pressure on equity futures and a retreat to havens such as the US dollar.
Nonetheless, the S&P/ASX 200 should claw back some of last week’s 3.1 per cent loss, provided the situation in Ukraine does not throw any new curveballs. Terrible though events are in Ukraine, financial markets appear to be over the initial shock and eager to move on.
Buyers appear to be betting on a short, contained confrontation. A drawn-out conflict or a spillover into other theatres would have a dramatic effect on the outlook. An energy price shock remains an obvious threat, with significant implications for inflation and global growth.
Growth stocks copped a hiding last week, particularly those whose earnings disappointed. The worst performers were Tyro Payments, Imugene, Appen and PointsBet. CIMIC jumped 34.9 per cent on takeover interest. Cochlear, HUB24 and Nickel Mines saw double-digit growth.
US sector gains on Friday ranged from 1.37 per cent for tech up to 3.58 per cent for basic materials. BHP‘s US-traded depositary receipts surged 5.61 per cent. The miner’s UK listing gained 5.01 per cent. Rio Tinto added 3.37 per cent in the US and 3.66 per cent in the UK.
Defensive sectors remained in demand. Utilities gained 3.14 per cent, consumer staples 3.12 per cent and health 3.03 per cent. The financial sector put on 3.16 per cent.
City Index senior market analyst Matt Simpson said, ASX “tech stocks are worth another look after enjoying their best day in over a decade on Friday. And if appetite for risk remains elevated then perhaps last week’s best performers, the utilities and consumer staples sectors, could meet some headwinds today.”
The last big day of the interim earnings season brings reports from Bank of Queensland, Zip Co, Allkem, Sandfire Resources, Waypoint REIT and InvoCare. Earnings from smaller companies will trickle in all week.
The rates outlook may gain some clarity when the Reserve Bank meets tomorrow. The central bank is expected to leave the cash rate at a record low, but changes to the accompanying statement have the potential to move the market. Quarterly economic growth figures on Wednesday could also generate excitement.
Also on the economic calendar this week: quarterly company operating profits, retail sales, private sector credit (today); manufacturing index (Tuesday); construction index (Thursday); and retail sales part 2 (Friday).
OPEC meets on Wednesday with crude prices near seven-year highs. Wall Street has monthly jobs data and semi-annual testimony from Federal Reserve Chair Jerome Powell to look forward to later in the week.
IPOs: the recent drought may break this week. The ASX has three new listings lined up. The delayed debut of SE Advanced Materials is scheduled for Wednesday. Also that day: Many Peaks Gold. Catalano Seafood is slated for Friday. All listings may be subject to change.
Commodities
Oil retreated from Thursday’s seven-year high. Brent crude settled US$1.15 or 1.2 per cent lower at US$97.93 a barrel. Prices hit US$105.79 on Thursday and gained 4.7 per cent for the week.
Gold slipped to its first weekly loss in four at the end of a volatile week that saw prices brush a 17-month peak. Gold for April delivery settled US$38.70 or 2 per cent lower at US$1,887.60 an ounce.
The yellow metal traded as high as US$1,976.50 on Thursday, a price last seen in September 2020. On Friday, the NYSE Arca Gold Bugs Index firmed 1.53 per cent.
“Gold and oil may be completely different commodities, but they have behaved like the same market in recent days,” City Index’s Simpson said. “Both had volatile bullish spikes on Thursday which reversed just as violently, before continuing lower on Friday.
“Russia’s invasion on Ukraine remains the key driver for both markets and we suspect they’ll continue to move in lockstep over the foreseeable future. And their direction will likely remain pinned to sentiment where they benefit from escalating tensions, and become less attractive should tensions recede.”
Iron ore declined after the Chinese government announced a cap on coal prices. China’s economic planning agency set a “reasonable” price range for thermal coal at Qinghunagdao Port in an apparent bid to stabilise pricing as the Ukraine crisis escalated.
“Setting a price range does not mean that we are going back to government pricing,” said Wan Jinsong, director of the National Development and Reform Commission’s price department.
“When the coal price falls or rises excessively beyond the reasonable range, it will bring adverse effects and even endanger security and stable supply of energy.”
The spot price for ore landed in China declined US$3.50 or 2.6 per cent to US$133.45 a tonne. Iron ore was relatively calm last week, relative to other commodities, finishing five cents below where it started the week.
Aluminium and nickel eased from multi-year peaks after sanctions against Russia appeared to leave metals untouched. Benchmark aluminium on the London Metal Exchange declined 1.09 per cent to US$3,357.50 a tonne. Nickel fell 1.44 per cent, zinc 0.54 per cent and tin 1.59 per cent. Copper edged up 0.09 per cent and lead 1.07 per cent.
