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Global Market Report - 14 February

Lewis Jackson  |  14 Feb 2022Text size  Decrease  Increase  |  
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Australia

Australian shares are set to slip as investors on Wall Street dumped stocks for bonds after President Biden warned a Russian invasion of Ukraine could be imminent.

ASX futures were down 33 points or 0.5% at 7075 near 8.00 am AEST, suggesting a negative start to trading.

US stocks and bond yields sank Friday, as growing tensions between Russia and Ukraine sent investors flocking to safer assets.

All three major US stock indexes finished the day lower, capping another volatile week on Wall Street. Just days ago, it seemed possible that indexes would extend their weekly winning streak to three. But concurrent concerns about rising inflation and geopolitical turbulence sent stocks tumbling in the final two days of the week.

The S&P 500 tumbled 1.9% on Friday. Its combined two-day loss over Thursday and Friday amounted to 3.7%, the index's largest two-day percentage decline since October 2020. The technology-heavy Nasdaq Composite slid 2.8%. The Dow Jones Industrial Average lost 1.4%.

All three major indexes ended the week with losses. The S&P 500 and Nasdaq Composite lost 1.8% and 2.2%, respectively, for the week. The Dow ended with a weekly loss of 1%.

Locally, the S&P/ASX 200 closed 1.0% lower at 7217.3, paring its weekly gains amid a sell-off of tech stocks. The benchmark snapped a three-day winning streak following losses by US indices, which slipped amid rising bond yields.

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Block's ASX-listed securities, Megaport, Appen and Life360 lost between 6.7% and 6.9% as the tech sector gave back much of its recent gains, albeit still finishing 1.8% higher for the week.

NAB, Westpac and ANZ all rose but a 2.2% fall by Commonwealth Bank and weakness elsewhere dragged the financial sector lower.

The materials sector was the only gainer, rising 0.3% on strength among iron-ore miners.
The ASX 200 rose 1.4% for the week.

Elsewhere in the world, the pan-continental Stoxx Europe 600 slipped 0.6%. In Asia, the Shanghai Composite Index fell 0.7%, while Hong Kong's Hang Seng Index ticked down 0.1%. Markets in Japan were closed for a public holiday.

Turning to commodities, gold futures added 0.3% to $US1842.10 an ounce; Brent crude gained 3.3% to $US94.44 a barrel, its highest level since 2014 amid volatility over Ukraine; Iron ore fell 8% to US$120.53.

In bond markets, the yield on the Australian 10-year bond rose to 2.21%. The benchmark US 10-year Treasury yield eased to 1.94% amid concerns a Russian invasion of Ukraine is imminent. Yields fall when prices rise.

The Australian dollar was buying 71.33 US cents near 8.00am AEST, down from the previous close of 71.64. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 89.89.

Asia

Turning to Asian markets, Chinese stocks closed lower on Friday, with losses among biotech and renewable energy-related sectors. There is still overhang on markets from the recent inclusion of more than 30 Chinese entities in a US "unverified list" that subjects them to tighter export controls, Nomura said. Electric-vehicle battery maker CATL lost 5.4% and LONGi Green Energy declined 4.9%, while WuXi AppTec shed 3.2% and Shenzhen Mindray Bio-Medical Electronics slid 4.0%, though none were on the list. Coal miners and lenders rose. Yankuang Energy advanced 5.2% and China Merchants Bank added 2.0%. The Shanghai Composite Index snapped a four-day winning streak, slipping 0.7%. The Shenzhen Composite Index weakened 1.7% and the ChiNext Price Index slumped 2.8%, taking its losses this week to 5.6%.

In Hong Kong, stocks ended the session lower, snapping a two-day recovery earlier this week. The benchmark Hang Seng Index edged down 0.1%. Drug developers led the downturn, as CSPC Pharmaceutical dived 5.9% to become the worst performer on the index. The stock's decline followed two days of strong gains after the company said it acquired a smaller biotech company to boost its product portfolio. Sino Biopharm shed 2.1%, while Wuxi Biologics lost a further 2.7% amid US regulatory uncertainties.

Japanese share markets were closed for a public holiday.

Europe

European stocks fell as Wall Street equities continued a slide from Thursday, prompted by higher-than-expected US inflation data. The pan-European Stoxx 600 decreased 0.6%.

Despite Friday's pullback, European stocks had a positive week, "buoyed by the ability of most companies to be able to pass on price rises and maintain their earnings guidance thresholds," CMC Markets analyst Michael Hewson says. The Stoxx 600 index is up 1.6% for the week.

In London, the FTSE 100 gave up 0.1%, on Friday as European markets clawed back the worst of the day's losses after starting on the back foot following Thursday's steep falls in the US, says Michael Hewson, chief market analyst at CMC Markets UK.

Despite Friday's fall, the FTSE 100 finished higher on a weekly basis for the second week in a row, up 1.9%. Shares in Unilever and British American Tobacco finished the day higher as the market digested full-year numbers from both. BP and Shell also are higher again, having slipped back on Thursday on the back of a weaker oil price, Hewson says.

North America

US stocks and bond yields sank Friday, as growing tensions between Russia and Ukraine sent investors flocking to safer assets.

All three major US stock indexes finished the day lower, capping another volatile week on Wall Street. Just days ago, it seemed possible that indexes would extend their weekly winning streak to three. But concurrent concerns about rising inflation and geopolitical turbulence sent stocks tumbling in the final two days of the week.

The S&P 500 tumbled 1.9% on Friday. Its combined two-day loss over Thursday and Friday amounted to 3.7%, the index's largest two-day percentage decline since October 2020. The technology-heavy Nasdaq Composite slid 2.8%. The Dow Jones Industrial Average lost 1.4%.

All three major indexes ended the week with losses. The S&P 500 and Nasdaq Composite lost 1.8% and 2.2%, respectively, for the week. The Dow ended with a weekly loss of 1%.

On Friday afternoon, the White House said it believes Russia could invade Ukraine at any time and urged Americans to leave the country as soon as possible. Investors, in turn, fled from stocks and sought safety in government bonds. The retreat from stocks extended a selloff that began Thursday after data showed inflation hit 7.5% in January, raising fresh concerns that the Federal Reserve might have to tighten monetary policy more aggressively than once thought.

The combination of economic news and global tensions injected fresh anxiety into a stock market that is already on shaky footing. Before this week, stocks were already down for 2022 after a turbulent January.

"There were a lot of looming things that are suddenly on everyone's radar and they are all contributing to the intensified volatility," said John Lynch, chief investment officer at Comerica Wealth Management. "The market has been counting on diplomacy and to a large extent ignoring the threat" on the Ukranian border.

The volatility in the stock market rippled across asset classes this week. Oil prices surged Friday, with Brent crude, the international oil benchmark, jumping 3.3% to $94.44 a barrel, its highest settle since September 2014.

In the bond market, meanwhile, the yield on the benchmark 10-year Treasury note retreated, a day after topping 2% for the first time since mid-2019. The yield, which settled Thursday at 2.028%, fell to 1.94% Friday. Yields and bond prices move inversely.

The sharp moves across the market unwound some of the stability that had been restored to markets earlier in the week. Before Thursday's volatile selloff, the S&P 500 had risen in seven out of the last nine sessions.

Before markets opened Friday, many investors were primarily focused on whether the Fed might accelerate interest-rate increases this spring to ease surging prices and cool the economy. Many investors were trying to carve out predictions on how large and how frequent the rate hikes might be.

"Inflation is currently in the public eye. It has become a political question," said Florian Ielpo, head of macro at Lombard Odier Investment Managers. "This is something that is concerning us, we have a rising risk of monetary policy mistakes. This is the number one risk we see in 2022."

By Friday afternoon, however, focus had turned to the Ukranian border. The Cboe Volatility Index—Wall Street's so-called fear gauge, also known as the VIX—jumped, settling at 27.36, its highest closing level since late January.

Among S&P 500 sectors, only the energy and utilities groups finished the day higher Friday. Occidental Petroleum gained $2.30, or about 5.7%, to finish at $42.98. Hess added $3.80, or 4.1%, to close at $96.20.

Zillow's Class C shares gained $6.61, or 14%, to finish at $55.40 after it reported a jump in revenue for its core unit, despite losing $881 million on its closed home-flipping business last year. Fintech company Affirm lost $12.13, or 21%, to close at $46.55 after its sales forecast came in below Wall Street's expectations. It also plunged 21% Thursday.

Apollo Global Management fell by $4, or 5.7%, to end at $65.57 after it reported a lower profit. The Wall Street Journal reported that the private-equity firm was nearing a deal to buy Worldline's point-of-sale terminal business.

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

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