Covid-19 fears spark Nasdaq, S&P 500 fall, China tech regulation bites again: ASX to fall


Wall St closed mixed on the ongoing concerns in Ukraine ahead of the Fed’s policy decision on Thursday. European shares rose on hopes of peace talks while price of oil & gold fell. China's tech sector comes under scrutiny again amid a fresh Covid-19 lockdown in China.

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

The Australian sharemarket is set to fall ahead of the mounting macro tensions.

Nasdaq, S&P 500 fall for 3rd straight day

US stocks closed mixed with technology shares leading the losses, as investors keep tabs on Russia’s incursion on Ukraine. Cyclical stocks rose on hopes of a positive outcome in peace talks, but growth stocks were up for sale ahead of the Fed’s policy decision mid this week.

Wall Street now awaits for the decision from the Fed on interest rates, as traders expect its first rate hike to kick-off for the first time in three years. Rates are set to rise by 25 basis points in an effort to squash rising inflation.

Meanwhile, Russia's offensive in Ukraine continues even as officials from both countries met several times. A fourth round of talks between the two sides is set to continue for the next 24 hours, while Ukrainian president Zelenskyy is set to talk virtually to members of the US Congress on Wednesday.

The surge in oil and commodities prices have tumbled on optimism of the next peace talk attempt and the latest news in China. Yet oil prices still remain elevated, though at their lowest point in two weeks. Investors hope that successful talks would eventuate and help boost the global oil supply as they feel the pinch at the pump.

However, we can’t just focus on Ukraine, now we need to talk about China.

Over the weekend, there were reports that Russians have asked the Chinese for help on the military side of things. An interesting move given the sanctions from the West onto Russia. It poses the question, does the US step in and pressure China to steer clear from Russia? What does this mean when it comes to the already strained tension globally amid the growing financial sanctions?

China locks down 17.5m residents on fresh Covid-19 outbreak

Elsewhere, China has locked down Shenzhen as Covid-19 cases surge with 17.5 million residents in lockdown, along with factories that help the rest of the world. Investors are still grappling with the fact that the country still operates under a zero-Covid policy. While in Hong Kong, we are seeing fresh outbreaks. I know we have viewers in Hong Kong - the team and I hope you’re keeping well.

China’s economy expected to slow down

All this ahead of the data docket this week which shows where the growth of China’s economy is at, which is expected to slow down. However, how much does this new move slow global growth and push inflation that much higher in a supply chain situation which is already under pressure?

China has four out of the five biggest ports in the world, so if activity from these ports come to a standstill, the momentum of global economic activity will grind to a halt. We are in such a complex environment at the moment.

China-tech shares tumble on supply & regulation hits

Shares in Apple tumbled 2.7 per cent amid this news that production had come to a halt in China amid the lockdowns, with supplies now under pressure. This is a surprise to investors given that Apple weathered the storm around the supply chain disruptions during the pandemic.

While on the Hang Seng, it wasn’t too pretty there. Meituan sank almost 17 per cent, Alibaba down almost 11 per cent and Tencent fell in the order of 10 per cent. The shares were punished after the tech regulator slapped new rules making it harder for them to profit from services targeted at teenagers.

While in the UK, after hearing from the ECB last week, investors have the Bank of England policy decision coming up.

Tech titans tumble amid search for value names

Despite the sell-off, it wasn’t a broad-based one. If you look back in the past year or so, investors have been paying a premium for these growth names like your tech titans, something one would do if you’re attracted to them. So what does this mean to a portfolio in times like this? The movements would be quite pronounced as they tend to be quite sensitive to the stock price and hence, the role of diversification and the search for value stocks with strong fundamentals were at play.

Figures around the globe

At the closing bell, the Dow Jones closed flat at 32,945, the S&P 500 fell 0.7 per cent to 4,173, holding at this 4,100 mark, while the Nasdaq closed over 2 per cent lower at 12,581

Across the S&P 500 sectors, four winners with financials as the best performer amid the surge in treasury yield, followed by healthcare boosted higher by Covid-19 vaccine maker amid the fresh lockdowns, followed by consumer staples and industrials. Energy was the worst performer, down 2.9 per cent followed by information technology, and communication services. The rest closed lower.

The yield on the 10-year treasury note soared 14 basis points to 2.19 per cent amid the imminent kick-off on tightening conditions and moves in the oil prices, the highest since July 2019. Gold fell on a stronger greenback.

Across the Atlantic, European markets closed higher. Paris added 1.8 per cent, Frankfurt closed 2.2 per cent higher and London’s FTSE gained 0.5 per cent.

Meanwhile, Rio dropped 4.8 per cent in UK trade on news of its US$2.7 billion offer to buy out minority shareholders in Turquoise Hill, its Canadian partner in Oyu Tolgoi. Shares crashed almost 32 per cent. Keep an eye out for Rio (ASX:RIO) today on the ASX.

Asian markets closed mixed as lockdowns amid supply chain woes in China compounded nerves on mounting concerns on imminent rate hikes, amid a drop in February's new bank lending, adding to more global uncertainties.

Tokyo’s Nikkei gained 0.6 per cent amid a weaker Yen, Hong Kong’s Hang Seng plunged almost 5 per cent while China’s Shanghai Composite dropped 2.6 per cent

Yesterday, the Australian sharemarket closed 1.2 per cent higher at 7,149 as CSL (ASX:CSL) and the banking bulls rallied. Financials was the best performer, up 2.5 per cent, its strongest start to a full trading week since early October. Materials was the only laggard, down 0.4 per cent.

The winning stock of the session was Elders (ASX:ELD), hitting a 12-year high on a strong trading update, closing 11 per cent higher at $13.32. It was followed by shares in Pendal Group (ASX:PDL), and Virgin Money UK (ASX:VUK). The losers were Paladin Energy (ASX:PDN), closing 7.5 per cent lower at $0.81. It was followed by shares in Chalice Mining (ASX:CHN) and Nickel Mines (ASX:NIC).

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.9 per cent fall.

Local economic news

Today the Reserve Bank is set to publish the minutes of its March meeting. Market participants will comb through for any clues as to whether the central bank may raise rates this year.

Also, ANZ-Roy Morgan consumer confidence index is also due while the Australian Bureau of Statistics has slated its residential property price indexes for the December quarter. A proxy for future household spending.

Ex-dividend

There are several companies going ex-dividend today.

Glennon SML Co (ASX:GC1) is paying 1 cent fully franked
Generation Dev Group (ASX:GDG) is paying 1 cent fully franked
Ivegroup (ASX:IGL) is paying 8.5 cents fully franked
Macmahon Holdings (ASX:MAH) is paying 0.3 cents unfranked
News Corp (ASX:NWS) is paying 9.8315 cents unfranked
Sandfire Resources (ASX:SFR) is paying 3 cents fully franked
Thorney Opportunities (ASX:TOP) is paying 1 cent fully franked
TPG Telecom (ASX:TPG) is paying 8.5 cents fully franked
Yancoal Aust (ASX:YAL) is paying 70.4 cents unfranked

Dividend-pay

There are eight companies set to pay eligible shareholders today.

Amcor Plc (ASX:AMC)
Domain Holdings Australia (ASX:DHG)
ECP Emerging Growth (ASX:ECP)
Johns Lyng Group (ASX:JLG)
Mystate (ASX:MYS)
Pengana International Equities (ASX:PIA)
Qualitas Real Estate Income Fund (ASX:QRI)
Sequoia Financial Group (ASX:SEQ)

Commodities

Iron ore has lost 6.2 per cent to US$144.90. Its futures point to a 1 per cent fall amid the fresh surge in Covid-19, set to retard the growth outlook in China.

Copper fell 2.5 per cent to US$4.49 a pound and aluminium dropped 5.1 per cent to US$1.49 a pound on easing supply concerns and demand doubts weighing in China.

Nickel trading remains suspended on the London Metal Exchange  since 8 March.

Gold has lost $30.00 or 1.5 per cent to US$1,955 an ounce. Silver is down $0.89 or 3.4 per cent to US$25.27 an ounce.

Oil has dropped $7.38 or 6.8 per cent to US$101.95 a barrel.

Currencies

One Australian Dollar at 8:00 AM has weakened from yesterday, buying 72.44 US cents (Mon: 72.92 US cents), 55.51 Pence Sterling, 85.28 Yen and 65.96 Euro cents.
 

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