Opening Call: The Australian share market is to open higher.
U.S. stocks were mixed on disappointing bank earnings and weak retail and manufacturing data. The yield on the 10-year Treasury rose to 1.79% amid expectations for tighter monetary policy. The WSJ Dollar Index climbed to 89.19. U.S. oil prices rose to their highest closing price since Nov. 9 as tensions between Russia and Ukraine intensified. Gold prices fell for the session, but posted a weekly gain.
Australia’s S&P/ASX 200 fell 1.1% as broad-based losses pulled the benchmark lower for the week. Ten of 11 sectors finished in negative territory, as the ASX 200 continued its volatile start to 2022. As in the U.S., tech stocks declined under pressure from government-bond yields. The heavyweight financial sector lost 1.0%. The ASX 200 lost 0.8% over the week.
The stock market’s winter selloff deepened this week, pushing all three major indexes further in the red for 2022. The S&P 500 and Dow Jones Industrial Average both fell a second straight week, while the Nasdaq Composite has been down the last three. Investors continued to assess the outlook for interest rates, and how fast the Federal Reserve will move to tame inflation, roiling the stock and bond markets. At the same time, the steep rise in Covid-19 cases hasn’t helped to soothe sentiment, although there are signs that infections may be nearing a peak.
“We expect a more volatile environment, with big up days and big down days. Perception of inflation will be a driving force in the direction of the market,” said David Donabedian, chief investment officer of CIBC Private Wealth US, adding that “it will be a bumpy ride.” For the session, the S&P 500 rose less than 0.1%. The Dow Jones Industrial Average shed 0.6%, while the Nasdaq Composite added 0.6%. For the week, the S&P 500 and the Nasdaq lost 0.3%, while the Dow shed 0.9%.
Gold futures ended with a loss, as some investors sold the precious metal ahead of the three-day holiday weekend in the U.S., but prices still tallied a gain for the week – their fifth in six weeks. Following the session’s “devastating U.S. retail sales report,” prices for gold climbed, but then moved lower, pressured by “profit-taking against the news and ahead of the long weekend,” said Colin Cieszynski , chief market strategist at SIA Wealth Management.
On Friday, February gold futures fell 0.3% to settle at $1,816.50 an ounce after trading as high as $1,829.30 during the session. There will be no regular trading in U.S. commodities markets on Monday due to the Martin Luther King, Jr., holiday.
Oil futures posted a fourth straight weekly gain, with an analyst offering a dire warning of potential supply disruptions as tensions between Russia and Ukraine intensified. “From an energy standpoint, this could be a seismic event,” said Phil Flynn, senior market analyst at The Price Futures Group. Russia is not only a major oil producer but Europe, in their rush to get off of fossil fuels, has “become more dependent on Russia as a major source for their energy.”
“The emerging crisis between Russia and Ukraine raises the political risk premium,” said Manish Raj, chief financial officer at Velandera Energy Partners. “Whereas the Russian-Ukrainian crisis directly affects the regional natural gas prices, crude oil prices are generally aloof, since little Russian oil transits through Ukraine,” he said. “Still, the possibility of an armed conflict is a serious development, and has wide geopolitical ramifications, thereby boosting oil price premiums.”
West Texas Intermediate crude for February delivery rose 2.1% to settle at $83.82 a barrel on the New York Mercantile Exchange, leading the U.S. benchmark to post a 6.2% weekly gain, its fourth weekly rise in a row, according to Dow Jones Market Data. March Brent crude, the global benchmark, added 1.9% to settle at $86.06 a barrel on ICE Futures Europe, for a 5.3% weekly advance.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1482 to lows near US$1.1398 and was near US$1.1415 at the US close. The Aussie dollar dipped from highs near US72.93 cents to lows near US71.97 cents and was near US72.05 cents at the US close. And the Japanese yen eased from near 113.50 yen per US dollar to JPY114.27 and was near JPY114.20 at the US close.
European sharemarkets fell on Friday. The pan-European STOXX 600 index shed 1%, while also marking its worst week since late November. Retail stocks slid 2.3% on Friday. Shares of EDF slumped 14.6% as the French government curbed electricity prices. The German Dax index lost 0.9% and the UK FTSE index slid 0.3%. In London trade, shares in Rio Tinto (-1.3%) and BHP (-1%) both fell.
Earlier Friday, Chinese shares closed the day mixed, despite data showing China’s 2021 trade surplus hit a record. The ongoing global recovery will likely continue to underpin demand for Chinese exports, CBA said, though it expects export growth to ease to single digits from recent highs. Consumer stocks were broadly lower. The Shanghai Composite Index slid 1.0%, the Shenzhen Composite Index ended flat and the ChiNext Price Index rose 1.2%.
Hong Kong’s Hang Seng Index lost 0.2%, weighed by a selloff in tech shares after Chinese internet stocks fell sharply overnight in the U.S. ADR market. China Cinda Asset Management slid 9.9% after it said it would scrap an agreement to purchase a 20% stake in a consumer finance unit of Ant Group. Japanese stocks were dragged down by electronics and real-estate stocks as the yen strengthened amid uncertainty over the Omicron variant. The Nikkei Stock Average fell 1.3%. Investors are focusing on U.S. economics data and the implication they will have on Fed policy.