Opening Call: The Australian share market is to open higher.
Australia’s S&P/ASX 200 added 0.3% as continued strength from commodity stocks carried the benchmark index to a fourth consecutive gain. The sector–the index’s second-largest by market capitalization–added 1.3% as iron-ore and gold miners rose. Energy explorers Santos, Woodside and Beach added between 0.6% and 1.2%, but the heavyweight financial sector slipped 0.5% on weakness from banks ANZ, NAB, Westpac and Commonwealth. The ASX 200 rose 1.5% for the week.
U.S. stocks continued their rebound for a second straight week, but rising interest rates threaten to temper their gains. The S&P 500 broad stock market index and the tech-heavy Nasdaq Composite both ended the week up more than 1%, as investors grew more confident that the U.S. economy will withstand the escalating war in Ukraine and the Federal Reserve’s plans to lift interest rates.
The moves follow last week’s rise of more than 6% for the S&P 500 and more than 8% for the Nasdaq. Still, stocks were mixed during the session in response to a fresh surge in bond yields, a sign that higher rates will continue to ripple through markets. The S&P 500 climbed 0.5%, but the Nasdaq Composite dropped 0.2%. The Dow Jones Industrial Average rose 0.4% for the day and added 0.3% for the week.
Forecasters have been predicting that the Federal Reserve will lift interest rates faster than it currently projects to clamp down on inflation that remains at a multi-decade high. Economists at banks including Citigroup and Bank of America raised the prospect that the central bank will lift rates by half a percentage point at a time, in contrast to this month’s quarter-point increase. “An additional rally from here could prove to be self-correcting because it could bring out the possibility of more and larger rate hikes,” said Doug Ramsey, chief investment officer at Leuthold Group.
At the same time, the war has driven concerns about inflation and disruptions to commodity supplies. “Markets are trying to price something that is basically impossible to price, as part of what’s going on in the world depends on Putin’s thinking, which nobody knows,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “The longer the conflict lasts, the higher the upside to inflation, the lower the downside to growth. It’s massively, radically uncertain.”
Gold futures suffered a loss for the session, but tallied a gain for the week, as traders eyed developments in the Russia-Ukraine war and an increasingly hawkish Federal Reserve. “The risk of the Russia-Ukraine war becoming [World War 3] is diminishing for the moment and the more immediate concern is the impact of more aggressive interest rates, especially on the economy,” said Edmund Moy, former director of the United States Mint and senior IRA strategist for gold and silver dealer U.S. Money Reserve.
But Russian President Vladimir Putin is “a wild card, and the war can quickly get ugly and spread,” Moy said. Gold futures for April delivery fell 0.4% to settle at $1,954.20 an ounce on Comex, but prices based on the most-active contract still gained 1.3% for the week, according to Dow Jones Market Data.
Oil futures finished the session higher, erasing earlier declines and boosting global prices by nearly 12% for the week, after reports of an attack on an oil facility in Saudi Arabia renewed concerns over global crude supplies. Prices for oil had been trading lower after European Union countries failed to agree on a ban on imports of Russian crude. Ongoing supply concerns, meanwhile, prompted prices to post their first weekly gain in three weeks.
Yemen’s Houthi rebels attacked an oil depot in the Saudi city of Jeddah ahead of a Formula One race, the Associated Press reported, adding that the attack targeted the same fuel depot the Houthis attacked in recent days. “Reports of a hit on Saudi Aramco are coming at a time when supply risk is higher than it had been in years,” said Phil Flynn, senior market analyst at The Price Futures Group.
“This is only going to make the supply demand deficit worse.” West Texas Intermediate crude for May delivery rose 1.4% to settle at $113.90 a barrel on the New York Mercantile Exchange, with the contract finishing up 10.5% for the week, according to Dow Jones Market Data. May Brent crude, the global benchmark, added 1.4% at $120.65 a barrel on ICE Futures Europe, with prices up almost 12% for the week.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1030 to lows near US$1.0979 and was near session lows at the US close. The Aussie dollar fell from highs near US75.34 cents to lows near US74.94 cents and was near US75.12 cents at the US close. And the Japanese yen eased from 121.45 yen per US dollar to JPY122.20 and was near JPY122.06 at the US close.
European sharemarkets were higher on Friday. Banks fell 0.5% but energy rose 1.3% and basic materials rose 0.8%. The German Ifo business climate index fell from 98.5 to 90.8 in March. The panEuropean STOXX 600 index rose by 0.1% on Friday but fell 0.2% over the week. The German Dax index and the UK FTSE index both rose by 0.2% on Friday. In London trade, shares in Rio Tinto rose by 1.2% and BHP shares lifted by 1.4%.
Earlier Friday, Chinese stocks ended lower, following broad losses in Asian equities. The Shanghai Composite Index lost 1.2%, while the Shenzhen Composite Index dropped 1.4%. The tech-heavy ChiNext Price Index was the worst performer, sinking 2.5%. Drug makers and medical services providers led the downturn, as the sector retreated from recent gains. Consumer goods firms further weighed on the market amid persisting concerns over China’s latest pandemic outbreak.
Hong Kong stocks also ended lower. The benchmark Hang Seng Index gave up 2.5%. Tech stocks led the downturn, as the sector continued to weaken from a recent rebound that had been driven by Beijing’s message of support for the sector. The Hang Seng TECH Index fell 5.0%. Consumer firms added further pressure, as Haidilao plunged 7.7% and Li Ning dropped 5.6%.
The Nikkei Stock Average, however, edged 0.1% higher, led by gains in chemical and pharmaceutical stocks, despite weakness from banks and insurers. Mitsubishi Chemical Holdings gained 2.6% and Nippon Paint Holdings rose 2.5% as some drops in crude oil prices eased concerns about higher costs of raw materials. The broader market index Topix ended flat.