Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Global Market Report - 07 March

Lewis Jackson  |  07 Mar 2022Text size  Decrease  Increase  |  
Email to Friend

Australia

Australian shares are set to open higher in what could be a week of volatile trading after stocks slumped on Wall Street as Russia’s war in Ukraine ground into its second week and commodity prices soared to new highs.

ASX futures were up 28 points or 0.4% at 7119, suggesting a positive start to trading.

The Dow dropped 0.5% on Friday, falling 1.3% for the week. The S&P 500 fell 0.8%. The Nasdaq Composite shed 1.7%. The S&P 500 and Nasdaq lost 1.3% and 2.8%, respectively, this week.

Oil prices closed at new highs on Friday, sparking fears that higher energy prices could add to inflation while also reducing growth as higher petrol prices forced consumers to cut spending elsewhere. Brent crude leapt 7% to US$118.11.

"It's beginning to look a little stagflationary," said Anwiti Bahuguna, a senior portfolio manager at Columbia Threadneedle, referring to the combination of muted economic growth and high inflation. "We have inflation sticking around longer and growth taking a leg down."

US secretary of state Antony Blinken said on Sunday that Washington and its European allies were in “active discussions” about banning Russian oil imports. A day earlier Russian President Vladimir Putin warned Western economic sanctions were "akin to a declaration of war".

Locally, the S&P/ASX 200 closed 0.6% lower at 7110.8 on Friday, trimming some intraday losses after the fallout from an attack on a nuclear plant in Ukraine proved to be not as bad as initially feared. Nearly all sectors closed in the red, with technology stocks losing the most ground, finishing down 3.6%. Appen lost 2.3%, while Tyro fell 5.4%.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

The financial and materials sectors, which together comprise about 50% of the ASX 200's market capitalization, fell 0.7% and 0.4%, respectively.

Commonwealth Bank finished up 0.1%, while Westpac, NAB and ANZ dropped between 0.8% and 1.2%.

Consumer staples and the utilities sectors closed up 1.2% and 0.8%, respectively.
The benchmark index gained 1.6% for the week.

AGL Energy’s board rejected a second bid from Canadian investment firm Brookfield and tech billionaire Mike Cannon-Brookes early on Monday, leading the buyers to walk away from a deal. The revised $8.25 bid, up from $7.50, valued the company at more than $8 billion including debt.

Turning to commodities, gold futures rose 1.6% to $US1966.60; Iron ore slipped 0.4% to US$152.40 per tonne.

In bond markets, the US 10-Year Treasury Notes declined again to 1.73%, recording its biggest one-week yield decline since March 2020. At home, the yield on the Australian 10-year bond eased to 2.15%. Yields fall when prices rise.

The Australian dollar was buying 73.72 US cents as of Saturday morning, up from the previous close of 73.26. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.93, it’s highest level since July 2020.

Asia

Turning to Asian markets, Chinese stocks ended lower Friday, as the market extended recent losses. The benchmark Shanghai Composite Index was down 1%, while the Shenzhen Composite Index sheds 1.4%. The ChiNext Price Index, a measure for emerging industries and startups, lost 1.6%. Brokerage Central China Securities advises investors to monitor Beijing policy directions, and to remain cautious amid continuing overseas risk factors.

In Hong Kong, the benchmark Hang Seng Index closed 2.5% lower as technology companies slumped. The Hang Seng Tech Index retreated 4.4%, with Hong Kong's tech sector tracking the weak performance of the US ADR market, KGI Securities says. NetEase dropped 5.7%, Meituan fell 5.4% and Alibaba lost 5.2%. The city's equities were also weighed down by its rapidly-deteriorating Covid-19 situation, Oanda adds. A notable mover was Country Garden Holdings, which added 6.1%, after securing a CNY15 billion line of financing from China Merchants Bank for acquisitions in the property market.

Japanese stocks ended lower, dragged by falls in auto and tech stocks as uncertainty persists over the war in Ukraine. Denso Corp. lost 6.3% and Lasertec Corp. dropped 5.9%. The Nikkei Stock Average fell 2.2%. Headlines on Ukraine remain in focus as a fire at a nuclear power plant in Ukraine prompted a call between President Biden and Ukraine's Zelensky.

Europe

European stocks sunk on Friday as the conflict in Ukraine continued to shake markets. The pan-European Stoxx Europe 600 fell 3.6%. The index dropped 7% for the week, its biggest weekly decline since March 2020.

"The week ends on a poor note for stocks, although gold and oil prices are still finding buyers, even after their huge rallies," IG analyst Chris Beauchamp says.

In London, the FTSE 100 fell 3.2%, facing further pressure amid the Russian invasion of Ukraine.

"It is clear that 'Ukraine worries' will be the catch-all term for market declines, but with the war now over a week old the same bearish view that developed last week still applies--markets are ill-prepared for a conflict with all its unknowable consequences, especially when combined with surging oil prices and rising inflation, mixed in with central banks who are not displaying any of the dovishness needed to rescue sentiment," Mr. Beauchamp says.

Russia's central bank kept the Moscow stock market largely closed for a fifth straight day on Friday, shielding local shares from a potential selloff.

Earlier in the week, clearinghouse operator Euroclear stopped investors from clearing trades involving ruble-denominated securities, while its competitor, Clearstream, said it would stop settling trades for various Russian-linked stocks and bonds, leaving some traders in the dark about their positions.

The Russian ruble lost 26% against the greenback this week, its worst week since 1998.

North America

The Dow Jones Industrial Average ended its fourth week of losses and bond yields recorded their biggest one-week decline since March 2020 as Russia's military campaign in Ukraine intensified.

Friday's moves capped a haywire week, with giant swings across currencies and stocks around the world and commodities prices soaring the most in decades. Many traders scrambled to understand the impact of sanctions and subsequent changes made by exchanges and financial firms globally after Russia's economy was severed from the rest of the world.

The Dow dropped 0.5% on Friday, falling 1.3% for the week. The S&P 500 fell 0.8%. The Nasdaq Composite shed 1.7%. The S&P 500 and Nasdaq lost 1.3% and 2.8%, respectively, this week.

Shares of banks and other financial-services companies led the way lower, while energy companies notched big gains. Occidental Petroleum gained 45% this week, while Chevron has added 13%.

In the US, a sharp run-up in commodity prices has raised concerns about economic growth at a time when prices have already been at a 40-year high.

Front-month futures prices for Brent crude oil, the global benchmark, rose 25% this week to $118.11, closing at the highest level since 2013. Corn futures recorded the biggest weekly gain since 2008. Wheat prices had their best week since at least 1959.

Goldman Sachs Group analysts said Thursday that higher oil-and-gas prices are the "key inflation risk for the United States" and that higher commodity prices threaten economic growth. Rising crude oil prices can lower GDP growth, they said, as consumers pull back on spending because of higher gas prices. Investors remained focused on the sharp rise in oil prices for much of the week.

"It feels like it's going to get a little higher from here, and it's just a question of how much higher," said Tom Reilly, an energy derivatives broker at TP ICAP Group, of oil prices, adding that there have been some sleepless nights for traders over the past week. "People are kind of waking up every couple hours and checking things to make sure things have not gotten too far out of whack."

Rising oil prices and the prospect of slower economic growth also have pushed investors into traditionally safer investments such as government bonds, while gold prices have risen to the highest level since 2020.

The yield on the benchmark 10-year US Treasury note declined to 1.722%, recording its biggest one-week yield decline since March 2020 as bond prices rallied. Bond yields have swung wildly throughout the week as investors have monitored the Russian invasion, comments from Federal Reserve Chairman Jerome Powell and economic data.

A strong jobs number early Friday wasn't enough to push major indexes higher or stall the decline in bond yields.

New data on Friday showed that the US added 678,000 jobs in February, more than the 440,000 expected by economists surveyed by The Wall Street Journal. The Fed has signalled that it is on track for a quarter-percentage-point interest-rate increase at its March meeting, removing some near-term uncertainty about interest rates.

"The jobs report was strong," said Amy Kong, chief investment officer at Barrett Asset Management. But "it doesn't necessarily change the Fed stance," she said.

The week was marked by frenetic trading in exchange-traded funds tied to Russia. The New York Stock Exchange halted trading in some Russia-linked exchange-traded funds, following a similar move with NYSE-listed Russian stocks earlier this week. Index providers moved to drop Russian stocks from influential indexes.

Despite the volatility around the globe, stocks in New York have been relatively resilient amid the conflict. The S&P 500 is above levels recorded last week, when Russia first invaded Ukraine.

"The US is less vulnerable to the Russia-Ukraine crisis than what you would see in Europe," said Seema Shah, chief strategist at Principal Global Investors. For now, she said, "The market is looking at [the situation] and saying the US economy is strong."

Still, the week's losses dragged the S&P 500 almost 10% from its high, while the Nasdaq is now down 17% from its recent high.

In corporate news, shares of Smith & Wesson Brands dropped $2.24, or 13%, to $15.65 after the gun maker reported that sales fell more than 30% during the holiday quarter.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend