Wall St closed at session lows amid fears of a commodity shortfall on the expanding sanctions to Russia from the West. US economic data mixed ahead of the jobs report. Oil prices retreat from record highs amid an imminent nuclear deal with Iran. Australia’s trade surplus grows. No economic news.The Australian sharemarket is set to dip after a choppy session on Wall St.
Stocks fall, oil slips amid mixed economic dataUS stocks closed at session lows as investors continue to monitor the war between Russia and Ukraine. Oil prices slipped, taking a breather after spiking to historic highs while concerns mount on rising inflation, not just for oil prices. The fluctuation underpinned by war headlines posed a balancing act for investors, following mixed US economic data.
Volatility ensued amid a French official citing that President Emmanuel Macron’s talk with Vladimir Putin failed to deliver a diplomatic breakthrough. The call left the French President convinced that “the worst is yet to come”.
ISM shows services sector slowdownContributing to the downside sentiment was the ISM service index, posting a third straight fall. Business activity, new orders, and employment showed steep declines. With the peak of Omicron behind us, economists expect a sharp rebound in March.
The results from the ISM overshadowed the figures from the weekly job claims which fell to its lowest level this year. ISM revealed that businesses had issues with hiring workers, with candidates asking for more pay. Factory employment growth also slowed last month which poses downside risk to job gains.
Oil rally takes a breatherMeanwhile, oil prices fluctuate as energy traders monitor the Iran nuclear deal. In early trade, Nymex crude hit 14-year new highs, after the Russian military took full control of the Ukrainian city of Kherson. If the nuclear deal lands this month, it means a supply of 80 million barrels is set to be available, likely to put a lid on the rally of oil prices.
However, weak oil prices extended after White House Press Secretary said, “we don’t have a strategic interest in reducing the global supply of energy, and that would raise prices at the gas pump for the American people”. Despite President Biden saying that he’s open to banning Russian oil imports, at this point it has not happened yet, with another stop gap to the oil rally set to be on the cards.
Australia’s trade surplus growsElsewhere, the Aussie dollar has a 73 cents handle though strong results from the nation’s trade surplus wasn’t enough of a catalyst to see it strengthen.
Our trade surplus grew to $12.9 billion in January, up from $8.8 billion the month before. Exports grew 8 per cent to an all-time high of $49.3 billion, while imports fell 2 per cent to a new record high of $36.4 billion over the month as per the Australian Bureau of Statistics. These numbers followed GDP for the fourth quarter rising 3.4 per cent, after a fall of 1.9 per cent the prior quarter.
We are seeing strong numbers come out here in Australia so it will be interesting to see if the RBA will be under further pressure to raise rates sooner than expected. They forecast inflation to be over 3 per cent, and they will not lift interest rates until inflation is “sustainably” within its target of 2 to 3 per cent. As we have talked about this week, it looks like the central bank has given itself some breathing space, let the economy run hot and wait for the inflation figure to remain above 3 per cent.
Choppiness continuesThe outlook for investors appears to be choppy as inflationary pressures mount which could prompt an aggressive tightening cycle. Central bankers walk the fine line as they hunt down inflation without damping growth. Additionally, the duration of the eastern Europe war has thrown another spanner in the works as the degree of the impact is still unknown.
We have the US jobs report tomorrow, inflation data next week, central banks in a fortnight. A lot on tap. While at home, resources stocks boom, Newcastle coal futures hit another record high, giving support for the local resources rally.
Figures around the globeAt the closing bell, Wall St closed lower. The Dow Jones lost 0.3 per cent to 33,795, the S&P 500 fell 0.5 per cent to 4,363 while the Nasdaq closed 1.6 per cent lower at 13,538.
Across the S&P 500 sectors, a shake-up from yesterday with quite a defensive feel. Utilities the gains, up 1.7 per cent, followed by real estate, consumer staples and healthcare. Classic bond proxies as we see the yield dip. There were gains in consumer staples and utilities, sectors that can pass on rising costs to consumers with four sectors in the red. Information technology was the second worst performer after consumer discretionary, down 2.3 per cent with communication services and financials, as we see banks and credit card giants cut their Russian exposure.
The yield on the 10-year treasury note fell by 1 point to near 1.85 per cent as prices rose, gold strengthened on a weaker greenback.
Across the Atlantic, European markets closed lower. Paris lost 1.8 per cent, Frankfurt fell 2.2 per cent to a 13-month low and London’s FTSE dropped 2.6 per cent, oil majors tumbled in the order of over 4 to 5 per cent as they self-sanctioned their Russian exposure.
On the London Stock Exchange, Rio closed 0.02 per cent higher, BP fell 4.3 per cent and Shell dropped 5.7 per cent.
Asian markets closed mixed. Tokyo’s Nikkei added 0.7 per cent, Hong Kong’s Hang Seng rose 0.6 per cent while China’s Shanghai Composite dipped 0.1 per cent.
Yesterday, the Australian sharemarket closed 0.5 per cent higher at 7,151, continuing its winning streak for its fifth straight day. Energy, materials, and utilities all rallied in lockstep for a second day, with consumer discretionary and industrials eking out a gain, offsetting the losses led by consumer staples, healthcare and information technology.
The best-performing stock in the ASX 200 was PointsBet Holdings
(ASX:PBH) amid speculation of a US merger, closing 18.2 per cent higher at $4.35. It was followed by shares in Whitehaven Coal
(ASX:WHC) and Liontown Resources
(ASX:LTR). The worst-performing stock in the S&P/ASX 200 was PolyNovo
(ASX:PNV), closing 6.4 per cent lower at $1.10. It was followed by shares in Platinum Asset Management
(ASX:PTM) and InvoCare
(ASX:IVC).
To find out more about yesterday’s action, join me
here for “Oil sizzles ASX's 5-day rally, closing 0.5% higher”
SPI futuresTaking all of this into the equation, the SPI futures are pointing to a 0.8 per cent fall.
Ex-dividendThere are over 10 companies trading ex-dividend today.
Ampol
(ASX:ALD) is paying 41 cents fully franked
Argo Global
(ASX:ALI) is paying 3.5 cents fully franked
Lifestyle Communities
(ASX:LIC) is paying 4.5 cents fully franked
MACA
(ASX:MLD) is paying 2.5 cents fully franked
Medibank Private
(ASX:MPL) is paying 6.1 cents fully franked
Nick Scali
(ASX:NCK) is paying 35 cents fully franked
Prime Financial
(ASX:PFG) is paying 0.5 cents fully franked
Propel Funeral Partners
(ASX:PFP) is paying 6 cents fully franked
SSR Mining Inc
(ASX:SSR) is paying 7.2564 cents unfranked
Universal Store
(ASX:UNI) is paying 11 cents fully franked
VGI Partners
(ASX:VGI) is paying 6 cents fully franked
Dividend-payThere are five companies set to pay eligible shareholders today.
GUD Holdings
(ASX:GUD)GWA Group
(ASX:GWA)Hotel Property Investments
(ASX:HPI)Korvest
(ASX:KOV)QV Equities
(ASX:QVE)CommoditiesIron ore has gained 5.5 per cent to US$153.00. Its futures point to a 3.5 per cent gain amid positive Chinese futures markets and demand.
Gold has gained $18.10 or 0.9 per cent to US$1,940 an ounce, we are seeing a consolidation here in the yellow metal. Silver is up $0.12 or 0.5 per cent to US$25.31 an ounce.
Oil has lost $2.50 or 2.3 per cent to US$108.10 a barrel.
CurrenciesOne Australian Dollar at 8:25 AM has strengthened from yesterday, buying 73.27 US cents (Thu: 72.96 US cents), 54.90 Pence Sterling, 84.60 Yen and 66.22 Euro cents.
