Wall St falls on failed peace talk, Inflation risk weighs on both Fed & ECB: ASX to drop


Wall St & European markets fell after talks between the Russian and Ukrainian foreign ministers failed to ceasefire, crushing hopes of a neutrality. Investors digested the latest inflation data hitting fresh 40-year highs, while hawkish ECB comments tipped Euro shares over. Asian stocks and ASX tracked the Wall St's prior rally.

Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.

US stocks fall as peace talk fails

The Australian sharemarket is set to fall as investors pivoted back to a risk-off mode.

US stocks fell after officials from Russia and Ukraine failed to find truce. Traders were watching for any signs from the peace talk to ease concerns about slowing global growth. The failed negotiations were in an attempt to establish a ceasefire, and a safe passage for civilians to flee the nation of Ukraine as the Russian attack continued.

Russia pledges to supply global gas & oil

Oil prices turned lower even as concerns mount about the global supply due to the ongoing conflict. Russia has pledged to fulfil its contractual obligations to supply one third of Europe's natural gas comes, along with its supply of seven per cent of the world's oil.

The United Arab Emirates (UAE) also reiterated its own commitment to a monthly agreement with OPEC+ rather to raise output by 400,000 barrels a day every month. The UAE also said it will not boost its own production aside from that particular agreement, taking back the glimmer of hope from yesterday.

US inflation hit fresh 40-year highs

Meanwhile, the figures for the US consumer price index (CPI) for February came in at 7.9 per cent for February, its biggest annual rise in 40 years as per the Bureau of Labor Statistics. The CPI accelerated for the sixth straight month and came spot on what economists expected. Americans are paying more across gas and food, and these figures were in the period before the war began, sparking concerns on what next month’s inflation figures will look like.

Investors are concerned that energy prices are rising faster than wages as the high frequency price hikes weigh on consumer sentiment. Despite being able to recoup some purchasing power through wage gains, increases tend to happen on a less frequent basis. LIke at an annual review time or half-yearly, or when one changes jobs, not fast enough to keep up with the pace of inflation.

Global corporates continue to exit Russian ties

Amid the geopolitical conflict, market participants are concerned that the impacts are going to be long-lasting. Aside from the financial sanctions to Russia from the West, global corporations are cutting ties from conducting business with Russia. Essentially, decoupling Russia out of the global economy.

We have seen this with McDonalds, Disney, and yesterday, Rio Tinto, Worley Parsons and even Woolworths are changing the name of a famous chicken product as part of the solidarity.

Today, Goldman Sach revealed plans to close its operations in Russia, making it the first major Wall Street bank to leave in response to the nation's invasion of Ukraine.

Inflation risk weighs on both Fed & ECB

Meanwhile, the largest Federal Reserve bond-buying program, quantitative easing, is ending with treasuries operation closed, while mortgage securities are set to end in the next 24 hours, ahead of the Fed meeting next week, in preparation for interest rate lift-off.

Elsewhere, the European Central Bank surprised market participants after announcing plans to accelerate its wind down of its bond buying program in the third quarter, signalling it is more concerned about record inflation than weaker economic growth. The ECB has decided to look through some of those growth headwinds, keeping interest rates on hold.

The Fed and the ECB are gearing up as inflation is set to soar over the coming months. Now, if energy and gas prices continue to march higher, they might be doing the job for the Fed, reducing demand.

Figures around the globe

At the closing bell, the Dow Jones lost 0.3 per cent to 33,174, the S&P 500 fell 0.4 per cent to 4,259 while the Nasdaq closed almost 1 per cent lower at 13,130.

Across the S&P 500 sectors, energy recouping from yesterday was the best performer, up 3.1 per cent, followed by consumer discretionary. The rest closed lower with information tech as the worst performer, down 1.8 per cent.

The yield on the 10-year treasury note rose by 4 points to near 1.99 per cent, prices fell as investors sold the debt, gold rose on a weaker greenback.

Across the Atlantic, European markets closed lower. Paris fell 2.8 per cent, Frankfurt closed 2.9 per cent lower and London’s FTSE lost 1.3 per cent.

On the London Stock Exchange, Rio dropped 5.5 per cent lower, BP fell 2.2 per cent and Shell fell 2.4 per cent.

Asian markets closed higher. Tokyo’s Nikkei jumped 3.9 per cent, Hong Kong’s Hang Seng added 1.3 per cent while China’s Shanghai Composite gained 1.2 per cent.

Yesterday, the Australian sharemarket closed 1.1 per cent higher at 7,131. For yesterday’s action, join me here for “Ukraine peace talk fuels hope, bolstering broad-rally”.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.5 per cent fall.
What to look out for today

The Reserve Bank governor, Philip Lowe is set to talk in a panel discussion at the Banking 2022 Conference in Sydney at 9.15am AEST.

This discussion followed news yesterday that deputy Guy Debelle has announced his departure after 25 years at the central bank to start as the CFO at Fortescue Metals’s energy business in June.

The announcement came as a surprise after he was only reappointed last year. Dr Debelle was seen as being the frontrunner to be appointed the next RBA governor next year.

Ex-dividend

There are a number of companies going ex-dividend today including Dusk Group and Grange Resources.

Base Resources (ASX:BSE) is paying 3 cents unfranked
Deterra Royalties (ASX:DRR) is paying 11.68 cents fully franked
Dusk Group (ASX:DSK) is paying 10 cents fully franked
Grange Resources (ASX:GRR) is paying 10 cents fully franked
Kelsian Group (ASX:KLS) is paying 7 cents fully franked
National Tyre & Wheel (ASX:NTD) is paying 3 cents fully franked
Wisetech Global (ASX:WTC) is paying 4.75 cents fully franked

Dividend-pay

There are 13 companies set to pay eligible shareholders today.

Argo Investments (ASX:ARG)
Baby Bunting Group (ASX:BBN)
Beacon Lighting Group (ASX:BLX)
Credit Corp Group (ASX:CCP)
JB Hi-Fi (ASX:JBH)
KKR Credit Income Fund (ASX:KKC)
MA Financial Group (ASX:MAF)
Navigator Global Investments (ASX:NGI)
Oz Minerals (ASX:OZL)
Schaffer Corporation (ASX:SFC)
Tamawood (ASX:TWD)
Virgin Money Uk Plc (ASX:VUK)
Whitehaven Coal (ASX:WHC)

IPO

There is one company set to make its debut on the ASX today. Keep an eye out for Catalano Seafood (ASX:CSF) after raising $6,000,000.

Commodities

Iron ore has lost 0.8 per cent to US$156.35. Its futures point to a 4.5 per cent gain.

Gold has gained $13.00 or 0.7 per cent to US$2001 an ounce. Silver is up $0.45 or 1.8 per cent to US$26.27 an ounce.

Oil has fallen $3.01 or 2.8 per cent to US$105.69 a barrel.

Base metals were mixed overnight with aluminium up 2.7 per cent and copper rose 1.3 per cent while zinc fell 1.9 per cent. London Metal Exchange (LME) nickel trading remains suspended, with the LME citing that the criteria is unmet for trading to resume.

Currencies

One Australian Dollar at 8:30 AM has strengthened from yesterday, buying 73.59 US cents (Thu: 73.22 US cents), 56.26 Pence Sterling, 85.46 Yen and 67.01 Euro cents.

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