Global market sell-off recovered after a second round of sanctions as Russia's invasion Ukraine deepens. Stocks with Russian exposure crashed while oil prices jumped. Insights around the economic benefit for China & Russia, and the SWIFT system. No local economic news today.
Good morning. Dip buyers emerge. I’m Melissa Darmawan for Finance News. This is your market outlook.
The Australian sharemarket is set to rally, eyeing to continue its winning streak for a fourth week.US stocks rally after 2nd round of sanctions
It was a volatile day on Wall St with the major indexes closing higher. The Dow moved in a 933 point range, it was down 859 points at one point while the Nasdaq, the tech index, was down 3.5 per cent, closing the day higher. This comes after President Biden slapped further sanctions with the back up of other world leaders against the Kremlin.
We woke up to Russia launching a full-scale military operation in Ukraine, with Russian forces launching airstrikes on cities and military bases, as Ukrainian citizens tried to flee while the government asked for international help. Officials in Europe have described Russia's attack in Ukraine as a “brutal act of war”.
President Biden outlined further sanctions against Russia including the country's ability to do business in US dollars, Euros, Pounds, and the Japanese Yen, blocking four additional banks with more sanctions, adding more Russian elites, and restricting state owned enterprises from raising funds. So far, no direct sanctions on Putin himself though it’s not ruled out. The purpose of these sanctions is to stop financing war operations.SWIFT still open for Russia
Markets concluded that President Biden didn’t push hard enough when it came to these sanctions. One of the contested points is that Russia can still transact on the SWIFT line, which is the Society of Worldwide Interbank Financial Telecommunication - an international payment system.
Given that Russia is one of the world’s largest suppliers of oil and gas, it relies on SWIFT to receive funds for its commodity sales. If Russia does get cut off from the payment network, how do they get pay or how do they pay? It then poses the question, what alternative payment system could they use? Could they use cryptocurrency? Bitcoin fell in the session and then rallied like equities did, or is it transactions by pay-in-full terms?
By all means, if world leaders cut Russia off the SWIFT line, this is one of the toughest sanctions to weaken Russia’s attack on Ukraine.China urges world leaders
Meanwhile, China is currently refusing to condemn Russia’s invasion, rather President Xi Jingping is urging restraint by world leaders.
A couple things to know is that Putin’s assault on Ukraine flies in the face of every single one of China’s foreign policy principles. These are mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other's internal affairs, equality and mutual benefit, and peaceful coexistence.
China has attached itself to Russia which was strengthened at the start of the Winter Olympics and is now in a difficult position, which is why China is urging diplomatic solutions by world leaders.Economic benefit for China, Russia
In terms of an economic benefit for China, Putin’s action throws a dagger through the heart of economic globalisation. No country in the world has benefited from economic globalisation more than the world’s second largest economy, China. It has interests all over the world with billions of dollars of investments.
Ukraine is China's largest trading partner since 2019 but on a broader level, China has an interest in global stability. It wants to push back against the US which hasn’t gone unnoticed. China wants stability, while Russia wants to use force and break apart the global order, while China wants to shape global order and rewrite the rules. Also, they could be eyeing out how this unfolds as it looks to recover Taiwan. So there is some parallel there, but for China to claim Taiwan is way more difficult.Crude prices
Meanwhile, the price of oil lost its gains after Biden's second round of sanctions did not put Russian energy supplies at risk and recovered by market close.
Despite the geo-political tensions overarching all economic data, stagflation risks is set6 to complicate global central bank’s outlook. Dip buyers saved the Nasdaq on a falling US treasury yield as they assess future value on these growth tech names. Analysts have said that expectations for an interest rate hike in Fed is pared back from 50 basis points to 25 basis points amid the escalating Russia-Ukraine crisis.Figures around the globe
At the closing bell, the Dow Jones gained 0.3 per cent to 33,224 the S&P 500 rose 1.6 per cent to 4,291 while the Nasdaq jumped 3.4 per cent to 13,474.
Across the S&P 500 sectors, consumer staples was the worst performer, followed by financials, energy and materials. Information tech powered up as the winner, followed by communication services and consumer discretionary.
The yield on the 10-year treasury note dipped 3 basis point to 1.96, gold weakened on a strengthening greenback.
Across the Atlantic, European markets closed lower. Paris dropped 3.8 per cent, Frankfurt plunged almost 4 per cent and London’s FTSE lost 3.9 per cent, dragged down by BP major, tumbling 4.6 per cent. Russia-exposed miners suffered losses up to 35 per cent while UK-listed Russian bank Sberbank Rossii collapsed 71.6 per cent.
Russia's Moscow exchange crashed 45 per cent at one point before recovering to close around 33 per cent lower. The rouble, which is their currency, dropped 10 per cent to a record low against the greenback before Russia's central bank stepped in to cushion the blow. Yields on Russian Government bonds surged to above 14 per cent as prices fell, the highest since January of 2015.
Ukraine's $195 billion stock market was closed. Europe's Stoxx 600 plummeted 3.5 per cent with banks, car and travel stocks slammed.
Asian markets closed lower. Tokyo’s Nikkei lost 1.8 per cent, Hong Kong’s Hang Seng dropped 3.2 per cent while China’s Shanghai Composite lost 1.7 per cent.
Yesterday, the Australian sharemarket closed almost 3 per cent lower at 6,991. For yesterday's action, please join me here
at "ASX bloodbath on Ukraine explosion shoots gold & oil higher, triggers 3% fall".SPI futures
Taking all of this into the equation, the SPI futures are pointing to a 1.2 per cent gain.Reporting season
Ardent Leisure Group (ASX:ALG)
Charter Hall Group (ASX:CHC)
Genworth Mortgage Insurance Australia (ASX:GMA)
Kogan.Com Ltd (ASX:KGN)
Mayne Pharma Group (ASX:MYX)
Medibank Private (ASX:MPL)
There are 19 companies trading ex-dividend today.
AVA Risk Group (ASX:AVA)
is paying 13 cents unfranked
is paying 3.8808 cents fully franked
is paying 10 cents fully franked
Beach Energy (ASX:BPT)
is paying 1 cent fully franked
BlueScope Steel (ASX:BSL)
is paying 25 cents unfranked
Estia Health (ASX:EHE)
is paying 2.35 cents fully franked
Fiducian Group (ASX:FID)
is paying 14.8 cents fully franked
Gryphon Capital (ASX:GCI)
is paying 0.7 cents unfranked
Ingenia Group (ASX:INA)
is paying 5.2 cents unfranked
Johns Lyng Group (ASX:JLG)
is paying 2.7 cents fully franked
KKR Credit Inc Fund (ASX:KKC)
is paying 1 cents unfranked
Lendlease Group (ASX:LLC)
is paying 5 cents unfranked
Newcrest Mining (ASX:NCM)
is paying 10.4822 cents fully franked
Perpetual Cred Trust (ASX:PCI)
is paying 0.3648 cents unfranked
is paying 6.5 cents fully franked
is paying 1.3 cents fully franked
Peter Warren (ASX:PWR)
is paying 9 cents fully franked
Qualitas Real Estate Income Fund (ASX:QRI)
is paying 0.5704 cents unfranked
360 Capital Enhanced Income Fund (ASX:TCF)
is paying 3 cents unfrankedDividend-pay
There are six companies set to pay eligible shareholders today
Australian Foundation Investment Company (ASX:AFI)
Aspen Group (ASX:APZ)
Bwp Trust (ASX:BWP)
Healthco Healthcare and Wellness Reit (ASX:HCW)
Homeco Daily Needs Reit (ASX:HDN)Commodities
Iron ore has lost 0.8 per cent to US$136.95. Its futures point to a 2.4 per cent fall.
Gold has lost $10.40 or 0.5 per cent to US$1900 an ounce. Silver is down $0.38 or 1.5 per cent to US$24.22 an ounce.
Oil has gained $1.22 or 1.3 per cent to US$93.32 a barrel.Currencies
One Australian Dollar at 8:30 AM has weakened from yesterday, buying 71.69 US cents (Thu: 72.33 US cents), 53.55 Pence Sterling, 82.83 Yen and 64.03 Euro cents.