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Global Market Report - 24 March

Lewis Jackson  |  24 Mar 2022Text size  Decrease  Increase  |  
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Australian shares look set to fall in line with Wall Street as a jump in oil prices reignited risk-off sentiment.

ASX futures were down 54 points or 0.7% at 7295 as of 8.00am AEST, snapping a three-day streak of gains in pre-market trading and suggesting a negative start to the day. The S&P 500 ticked down about 1.2% on Wednesday, while the Dow Jones Industrial Average fell 1.3%. The tech-focused Nasdaq Composite Index was down 1.3%.

Sentiment took a downwards turn on Wednesday as global oil prices breached US$120 for the first time in two weeks amid the closure of a key Russian pipeline for repairs. The supply lost equates to roughly 1% of global demand and could take two months to fix according to Russian officials. Separately, Russian President Vladimir Putin said Russia would soon force “unfriendly countries” to pay for natural gas in roubles. European natural gas prices closed higher on the news.

"Things will stay highly sensitive to the events unfolding in Ukraine," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, noting that sharp moves in energy prices will continue to weigh heavily on indexes. "There is still real pressure on oil prices that is adding to inflationary concerns."

Locally, S&P ASX/200 S&P/ASX 200 closed 0.5% higher on Wednesday at 7377.9, led by tech stocks and shares of financial companies likely to benefit from higher interest rates.

Tech stocks followed a positive lead from the Nasdaq Composite, which outperformed the S&P 500 and DJIA on Tuesday. Block's ASX-listed securities rose 7.5% to a record A$188.10, while WiseTech and Xero added 2.1% and 4.2%, respectively.

Shares in Uniti surged 11% before being placed in a trading halt amid media reports of a second bidder for the telecoms services provider.

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Lenders ANZ, Westpac, Macquarie, Commonwealth and NAB--which comprise about 22% of the ASX 200 by market capitalization--added between 0.8% and 1.6%.

Only the materials sector lost ground, pulling back 0.4% after five consecutive sessions higher.

Santos announced it had made a new oil discovery near the Dorado field it is developing with Carnarvon Energy in Western Australia. Shares closed down 0.3%.

Investors in Australia's big retail banks can look forward to more share buybacks, Morgan Stanley said in a note on Wednesday. "We expect ANZ and NAB to announce new buybacks of A$1 billion and A$2 billion, respectively, at their 1H results in May," says the bank.

In commodity markets, iron ore gained 2.1% to US$146.45 per tonne; Brent Crude jumped 5.2% to US$121.47; gold futures moved 0.8% higher to $1942.60.

US bond yields retraced gains triggered by Monday’s hawkish comments from Fed Chairman Powell. Yields on the US 10-Year Treasury Note eased to 2.29%. The yield on the Australian 10-year bond gained to 2.77%. Yields rise when prices fall.

The Australian jumped to its highest level since November 2021 and was buying 74.98 US cents as of 8.00am AEST, up from the previous close of 74.69. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, was higher at 91.31.


Chinese stocks ended the session higher, as property-management and telecom sectors supported gains. The benchmark Shanghai Composite Index rose 0.3%, while the Shenzhen Composite Index added 0.5%. The tech-heavy ChiNext Price Index was the best performer, ending 1.0% higher. Property-management companies extended the strong gains from the previous session, as sentiment remained upbeat following recent local policy easing and fundraising progress by some major developers. Telecom stocks lent further support, driven by ZTE's 10% surge after the company confirmed that its probation under a US monitor has officially ended.

Hong Kong shares closed higher, with the benchmark Hang Seng Index rising 1.2%. Asian equities were buoyed by gains in US equity markets overnight, Oanda said, adding that "China's tech-heavyweight buyback fever has lifted the Hang Seng." The Hang Seng TECH Index advanced 2.1%. Notable gainers included Xiaomi Corp., which rose 4.1% after reporting higher 4Q net profit. ZTE Corp. jumped 23% after saying a US court ended its period of compliance probation.

Japanese stocks ended higher, led by sharp gains in electronics and technology stocks, as the yen weakened to its lowest level in more than six years. Lasertec jumped 10% and SoftBank Group advanced 7.2%. The Nikkei Stock Average climbed 3.0%, its highest level since Jan 2018. Investors remain focused on the war in Ukraine as the Biden administration prepares additional sanctions on Moscow.


European markets fell as Wall Street dropped amid continuing geopolitical tensions amid Russia's invasion of Ukraine. The pan-European Stoxx Europe 600 lost 1.1%, snapping a five-day streak.

A NATO meeting tomorrow (overnight Thursday Australia) is expected to approve major increases in its forces in eastern Europe and Ukraine is resisting Russian advances in some parts of the country, according to reports. "European markets have undergone a somewhat choppy session, starting it on the front foot before sliding back into negative territory on some modest profit-taking,"

In London, the FTSE 100 slipped on Wednesday, closing 0.2% lower as UK Treasury chief Rishi Sunak presented his Spring Statement to the country's parliament.

"We're seeing modest losses in the likes of UK focused companies like house builders and consumer discretionary on disappointment after the Chancellor of the Exchequer gave a downbeat assessment of the UK economy, as the Office for Budget Responsibility downgraded its outlook for 2022 and 2023," CMC Markets said.

Russia's stock market is set for a partial reopening Thursday, almost a month after it closed trading following the country's invasion of Ukraine. Investors and analysts expect that the reopening could send Russian stocks into free fall.

North America

US stocks declined and oil prices jumped, as concerns about rising energy prices, supply shortages and inflation rattled investors once again.

The S&P 500 ticked down about 1.2% on Wednesday, while the Dow Jones Industrial Average fell 1.3%. The tech-focused Nasdaq Composite Index was down 1.3%. Major US stock indexes jumped Tuesday, as investors shrugged off worries that inflation will push the nation's economy into a recession.

On Wednesday, however, some of that confidence faded after Brent crude, the international benchmark, moved higher again. Futures on Brent crude gained $6.12 a barrel, or 5.3%, to $121.60, the third highest settlement value of the year and the highest level since March 8. Brent crude has surged 56% this year amid an expanding global economy as the coronavirus pandemic waned and concerns about supplies due to Russia's invasion of Ukraine.

Adding to those concerns Wednesday: Russia said on Tuesday that oil exports via a pipeline from Kazakhstan to the Black Sea may temporarily fall by around 1 million barrels a day -- representing about 1% of global oil demand -- citing storm damage. Repairs could take up to two months, Russian officials said.

"Things will stay highly sensitive to the events unfolding in Ukraine," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, noting that sharp moves in energy prices will continue to weigh heavily on indexes. "There is still real pressure on oil prices that is adding to inflationary concerns."

Commodities were snapping higher across the board on a range of issues that threatened to pinch supply chains. Comex Copper gained 1.6% to $4.76 a pound, its fifth highest close in history, leaving it up 6.9% for the year.

Aluminium, nickel and steel prices also rose on concerns ranging from the war in Ukraine to Covid-19 lockdowns in China. Tangshan, the biggest steelmaking city in China, told residents to stay home due to a Covid-19 surge, according to Reuters. The city accounts for 58% of China's strip-steel output, London commodity broker SP Angel said in a Wednesday note.

"Inflation is still the 800-pound gorilla," said Doug Sandler, global head of strategy at RiverFront Investment Group. The concern is that rising prices will force the Federal Reserve to raise rates faster than investors had previously expected, he said.

Mr. Sandler said his firm started paring back its stockholdings earlier this year amid concerns about a riskier, more uncertain environment for the US and global economies. The hope, he said, is that supply-chain issues that have pushed up the price of everything from corn to copper will work themselves out in the coming months, reducing the need for sharply higher fed-funds rates.

A sharp rally in US government bond yields paused. The yield on the 10-year US Treasury note edged lower to 2.320%, from 2.375% the day before. Yields on US government bonds zoomed higher this week after Fed Chairman Jerome Powell said the central bank was prepared to raise interest rates in half-percentage-point steps if needed to tame inflation. Yields climb when bond prices fall.

Other signs emerged Wednesday that investors were eyeing assets they perceive as safer. The ICE US Dollar index, which tracks the currency against a basket of others, rose 0.4% in recent trading. Gold prices advanced 0.8%.

In recent days, global markets seemed to have turned a corner, despite anxieties about mounting inflation and the war in Ukraine. The S&P 500 on Tuesday rose above its 200-day moving average after falling below it on Feb. 17. The benchmark index has advanced 1% or more in five of the last six sessions, bringing it up 8.1% over that period and erasing all of the losses seen since Russia invaded Ukraine.

The recent rally has come even as Russia's attacks on Ukraine intensify, Western countries continue to pile on sanctions and pricing pressures show no signs of abating. On Wednesday, fresh data on inflation showed that consumer prices in the UK rose 6.2% in February compared with a year earlier, up from 5.5% in January, marking the highest rate since March 1992.

Fari Hamzei, of Hamzei Analytics, said the recent bounce in stocks has come on low volume, indicating it could be a so-called bear-market rally. He is looking for a few days of large drops in which 90% of New York Stock Exchange stocks decline, which would signal a buying opportunity.

"We haven't seen capitulation," he said. "You need volume to confirm the price action."

Sharply higher oil prices could trigger such a decline. Mr. Hamzei expects WTI crude oil, which changed hands at about $114 a barrel Wednesday, to surge to between $135 or $145 a barrel. A significant escalation of the conflict in Ukraine, he said, could also push investors out of stocks.

In afternoon trading in New York, shares of energy companies also moved higher. Exxon Mobil and Chevron gained about 1.6% and 1.1% respectively.

Higher oil prices could spark more consumer interest in electric vehicles, analysts said. Shares of Tesla were up about 0.5%. The stock has risen each of the last seven trading days, its longest winning streak since August 2021, putting the EV maker up more than 30% in that time period.

Meanwhile, shares of meme stocks -- which have largely slumped this year -- enjoyed a resurgence. Shares of GameStop climbed 14.5% after the company's chairman, Ryan Cohen, disclosed his firm bought 100,000 shares of the company's stock on Tuesday. Shares of AMC Entertainment Holdings, which tend to move in correlation with GameStop, climbed 14%.

Shares of Adobe slumped 9.3%. The software company reported higher profit and better-than-expected revenue growth Tuesday, but said it expects a hit to annual revenue from the war in Ukraine.

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

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