Opening Call: The Australian share market is to open higher.
Australia’s S&P/ASX 200 index closed 1.0% lower, losing almost all of its weekly gains amid continued concern over Russia and Ukraine. Ten of the ASX 200’s 11 sectors finished lower. The materials sector finished flat, thanks to gains by shares in gold miners, which are viewed by investors as relatively safe assets. The heavyweight financial sector shed 0.9%. The ASX 200 gained less than 0.1% for the week.
Stocks posted weekly losses as the escalating violence in Ukraine and uncertain path of U.S. monetary policy weighed on market sentiment. The S&P 500 dropped 0.7%, losing 1.6% on the week while the Dow Jones Industrial Average fell 0.7%. The tech-heavy Nasdaq Composite Index retreated 1.2%. The Dow industrials and Nasdaq Composite declined 1.9% and 1.8% for the week, respectively. The S&P 500 is down 8.5% in 2022, while the Nasdaq Composite is down 13%.
Conflict could inject fresh volatility into markets, with the heightening of geopolitical uncertainty prompting some traders to sell first and ask questions later. “It could create a more risk off environment where investors just want to move out of riskier assets into safer assets,” said Michael Sheldon, chief investment officer at investment advisory firm RDM Financial Group.
Gold futures ended lower, easing back a day after the crisis in Ukraine helped lift the commodity to its highest finish in eight months. But prices still marked the sharpest weekly gain in nine months. April gold lost 0.1% to settle at $1,899.80 an ounce. For the week, the precious metal rose 3.1% – the steepest weekly rise since May of 2021.
Gold prices may be likely to retreat if NATO-Russia tensions ease, but the “underlying drivers look set to remain,” said Adrian Ash, director of research at BullionVault. “Asian consumer demand continues to rebound from the Covid shutdown, and central banks also continue to accumulate gold as a group.”
Oil futures marked their first weekly loss since mid-December, as prospects for restoring the Iran nuclear deal outweighed fears of supply disruptions should Russia invade Ukraine. West Texas Intermediate crude for March delivery fell nearly 0.8% to settle at $91.07 a barrel on the New York Mercantile Exchange. April Brent crude, the global benchmark, rose 0.6% to settle at $93.54 a barrel on ICE Futures Europe, but saw a roughly 1% weekly decline. The weekly losses for WTI and Brent were the first since mid-December.
“There is no doubt that (a) lifting of Iranian oil sanctions could soften the blow against the potential disruption of a Russia-Ukraine war, ” said Phil Flynn, senior market analyst at The Price Futures Group. Still, it is “unclear as to how much more oil [Iran] could actually add to the global marketplace.”
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1375 to lows near US$1.1315 and was near US$1.1320 at the US close. The Aussie dollar fell from highs near US72.25 cents to lows near US71.65 cents and was near US71.75 cents at the US close. And the Japanese yen held between 114.96 yen per US dollar and JPY115.25 and was near JPY115.00 at the US close.
European sharemarkets closed lower on Friday. Travel & Leisure fell by 3.1%. Shares in Allianz fell 3.8% after it announced a settlement with a “vast majority” of investors. The pan-European STOXX 600 index fell by 0.8% to be down 1.9% on the week. The German Dax index lost 1.5% and the UK FTSE index eased by 0.3%. In London trade, shares in Rio Tinto rose by 1.2% and BHP
Japanese stocks ended lower, dragged by falls in electronics stocks, as geopolitical uncertainty continued over Ukraine. The Nikkei Stock Average fell 0.4%. Chinese shares closed mixed, helped by gains in financial stocks. The Shanghai Composite Index was 0.7% higher, the Shenzhen Composite Index gained 0.4%, and the ChiNext Price Index was 0.5% lower. Investors’ near-term focus will likely be China’s February one-year and five-year loan prime rate fixing decision on Monday, UOB said.
“While we think the PBOC has room to lower the LPR further, any further cuts will likely be small,” UOB said. Financial stocks were higher, with Bank of China, Bank of Shanghai and Industrial & Commercial Bank of China each gaining 0.6%.