Oil price falls to US$95, Nickel trade to resume on LME, S&P snaps 3-day losing streak: ASX to rise


Wall St soars as dip buyers emerge amid hopes of a positive outcome on peace talks between Russia and Ukraine. Commodity prices continue to slide amid nickel trading to resume on LME in 24 hours. China and Hong Kong stocks slumped amid Covid-19 lockdowns, tech regulation and Russia ties.

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

The Australian sharemarket is set to start on a positive note after a mixed start to the week.

S&P snaps 3-day losing streak

Investors showed risk-on relief, contributing to Wall St’s rally. The Dow jumped 600 points, the S&P 500 snapped its 3-day losing streak while tech outperformed. Oil prices continue to slide while new inflation data came in softer than expected. All this ahead of the upcoming Federal Reserve's interest rate decision.

Traders are expecting the US central bank to unveil its first rate hike in three years, predicting the interest rate to rise 25 basis points to suppress rising inflation.

Meanwhile, Russia is stepping up its incursion on Ukraine as the number of refugees fleeing the area rises. Civilians are attempting to leave through a humanitarian-safe corridor, officials say it’s the biggest evacuation effort.

Peace talks were underway for a second straight day with no resolution in sight. Three leaders of European countries are set to visit the Ukrainian capital as a form of solidarity for the country. While President Biden is slated to travel to Brussels later this month for a NATO summit.

Oil rally slows down

The oil price rally is slowing down, closing below US$100 a barrel as fears over supply disruptions ease as investors monitor the lockdowns in China. Russia and Ukraine are major oil producers, raising concerns that the conflict would hurt the global supply of energy, leading to a further surge in inflation, especially on the uncertainty around slapping sanctions on Russian oil imports.

Nickel to resume trading with new rules

Nickel trading will resume at the London Metal Exchange in the next 24 hours one week after trading was halted, when the price skyrocketed to more than US$100,000 a tonne. So to give more colour, let’s talk about what nickel is used for.

Over 70 per cent of nickel is used to produce stainless steel, 20 per cent of it is used for alloys and plating, like sterling silver jewellery and musical instruments and the rest is to make batteries for electric vehicles.

The set to resume trade of nickel futures is coming with a new tranche of restrictions, including trading bans, not only for nickel but for the other metals on the exchange as well. The move comes after a tycoon in China considered the nickel market to be overly inflated and had a short position on the metal. Then the Russian war on Ukraine happened and things just changed suddenly, so a mix of geopolitics and a small market contributed to this swing.

The new rules that the LME has put in place include daily price limits, brokers to disclose its nickel positions, along with this metal subject to a 5 per cent price limit.

Meanwhile, talking more about oil and also iron ore, prices fell not only on concerns about the Ukraine crisis but also on China’s demand weakness in light of the new Covid-19 lockdown. Prior to this regarding iron ore, there was a property sector clampdown plus a raft of regulations going through the country. While on the oil front, depending on what OPEC’s monthly oil report reveals, it could be a catalyst to reverse the downside.

Elsewhere, a big sell-off in both Hong Kong and Shanghai was seen. Why? Investors focused on the tech sector due to concerns with the ongoing regulatory crackdown, and prospects of Hong Kong, Chinese companies having to delist from the US. Not to mention, you have China locking parts of the country due to Covid-19, and there are concerns about potential ramifications against China due to its ties with Russia. All this offsetting the better retail sales data plus a docket backward looking economic data.

Wage growth on watch by RBA

Back home, minutes from the Reserve Bank’s March meeting confirmed that wages growth will underpin its decisions on official interest rates, even as they monitor inflation figures from stronger commodity prices amid the war.

Figures around the globe

With the several dynamics at play, investors feel comfortable that monetary policy adjustments appear to be less aggressive, giving room for shares to rally.

At the closing bell, the Dow Jones rose 1.8 per cent to 33,544, the S&P 500 added 2.2 per cent to 4,263 while the Nasdaq jumped 3 per cent at 12,949.

Across the S&P 500 sectors, it was a reversal from yesterday. We see a rotation out of energy into the other sectors, with energy as the only loser of the session. The biggest winner was information tech, up 3.4 per cent, followed by consumer discretionary, flight stocks took off with Delta up over 8 per cent amid reprieve around inflation concerns, and staples plus communication services within that mix.

The yield on the 10-year treasury note rose 2 points to near 2.16 per cent, the highest since July 2019, gold lost over 2 per cent on a firmer greenback.

Across the Atlantic, European markets closed lower. Paris fell 0.2 per cent, Frankfurt closed 0.1 per cent lower and London’s FTSE lost 0.3 per cent. The UK's jobless rate fell to 3.9 per cent, its lowest level since January 2020, supporting the case for an interest rate hike by the Bank of England this week.

On the London Stock Exchange, Rio fell 1.7 per cent, BP added 1.3 per cent and Shell gained 0.7 per cent.

Asian markets closed mixed. Tokyo’s Nikkei added 0.2 per cent, Hong Kong’s Hang Seng plunged almost 5.7 per cent, ending at its lowest since 2016 while China’s Shanghai Composite dropped almost 5 per cent.

Yesterday, the Australian sharemarket closed 0.7 per cent lower at 7,097 as banks rallied for its second straight day while a tumble in resource heavyweights underwhelmed as commodities prices tumbled on fears of Covid-19 lockdowns in China.

Investors also assessed China's role as the largest consumer of iron ore, steel, copper and nickel, and given that they are the second-largest consumer of oil, what economic damage would prevail.

This didn’t help nickel miner Chalice Mining (ASX:CHN), closing 10.3 per cent lower at $6.80 as the worst performer of the session. It was followed by shares in Champion Iron (ASX:CIA) and Zip Co (ASX:Z1P).

The best-performer was Uniti Group (ASX:UWL) after the telco confirmed that Morrison & Co proposed a $4.50 cash a share takeover bid, valuing the deal at $3.1 billion, soaring 27.3 per cent higher at $4.01. It was followed by shares in Clinuvel Pharmaceuticals (ASX:CUV) and Janus Henderson Group (ASX:JHG).

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.6 per cent gain

IPO

There is one company set to make its debut on the ASX. Keep an eye out for Many Peaks Gold (ASX:MPG) after raising $5.5 million at 20 cents.

Ex-dividend

Austal (ASX:ASB) is paying 4 cents unfranked
Blackwall (ASX:BWF) is paying 2.6 cents fully franked
Data#3 (ASX:DTL) is paying 7.25 cents fully franked
Earlypay (ASX:EPY) is paying 1.4 cents fully franked
Inghams Group (ASX:ING) is paying 6.5 cents fully franked
Mercury NZ (ASX:MCY) is paying 7.4509 cents unfranked
Morphic Ethical Equities Fund (ASX:MEC) is paying 1.5 cents fully franked
Money3 Corporation (ASX:MNY) is paying 6 cents fully franked
MotorCycle Holdings (ASX:MTO) is paying 12 cents fully franked
Plato Inc Max (ASX:PL8) is paying 0.5 cents fully franked
Shriro Holdings (ASX:SHM) is paying 6 cents fully franked
Shaver Shop Grp (ASX:SSG) is paying 4.5 cents fully franked
VGI Partners Global Investments (ASX:VG1) is paying 4.5 cents fully franked

Dividend-pay

There are six companies set to pay eligible shareholders today

Bell Financial Group (ASX:BFG)
Enero Group (ASX:EGG)
Heartland Group Holdings (ASX:HGH)
Lendlease Group (ASX:LLC)
Partners Group Global Income Fund (ASX:PGG)
Vgi Partners (ASX:VGI)

Commodities

Iron ore has fallen 6.5 per cent to US$135.55. Its futures point to a 1 per cent gain.

Gold has lost $43.90 or 2.2 per cent to US$1,917 an ounce. Silver is down $0.23 or 0.9 per cent to US$25.07 an ounce.

Oil has dropped $7.72 or 7.5 per cent to US$95.29 a barrel.

Currencies

One Australian Dollar at 7:35 AM has weakened from yesterday, buying 71.96 US cents (Tue: 72.44 US cents), 55.20 Pence Sterling, 85.14 Yen and 65.76 Euro cents.

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