Opening Call: The Australian share market is to open higher.
Australia’s S&P/ASX 200 index edged 0.1% higher as shares of large-cap mining companies and banks pushed the benchmark to a fifth-consecutive gain. Fortescue Metals, Rio Tinto and BHP added between 0.8% and 2.3% amid higher iron ore prices. Banks Commonwealth, ANZ, NAB, Macquarie and Westpac put on between 0.2% and 1.2% as expectations of interest-rate rises hardened. The tech sector was the biggest loser, dropping 2.7%.
U.S. stocks closed slightly higher following a choppy session, with investors preparing for a campaign of interest-rate increases from the Federal Reserve. The S&P 500 added 0.7%. Consumer discretionary and real-estate stocks rose, while energy shares led the benchmark’s decliners. The tech-focused Nasdaq Composite Index ticked up 1.3% while the Dow Jones Industrial Average added 0.3%.
Fed officials have recently signaled openness to the central bank making half-percentage-point interest rate increases if the economic outlook calls for it, rather than the quarter-percentage-point changes that are more customary.
Gold futures fell for a second straight session as the U.S. dollar strengthened and investors eyed developments in the Russia-Ukraine war. April gold fell 0.7% to settle at $1,921.90 an ounce on Comex. Meanwhile, the dollar was stronger versus major rivals, with the ICE U.S. Dollar Index up 0.3%. “The dollar has generally been the primary safe haven in recent weeks, but interest in gold, while perhaps somewhat subdued, is still relatively solid,” said Rhona O’Connell, head of market analysis, EMEA & Asia, at StoneX, in a note. “Investor sentiment has remained positive in the face of continued geopolitical risk,” she said.
Oil prices dropped about 7% to settle at their lowest level in more than a week, as a worsening Covid outbreak in China threatened to hurt energy demand. Hopes for progress in peace talks between Russia and Ukraine helped ease some concerns over risks to energy supplies. West Texas Intermediate crude for May delivery dropped about 7% to settle at $103.63 a barrel on the New York Mercantile Exchange. May Brent crude, the global benchmark, sank 6.8% to end at $106.96 a barrel on ICE Futures Europe.
“Global markets seem to be a bit nervous about the effectiveness of China’s zero-tolerance policy toward Covid and the potential for more demand and supply chain disruptions as we might be only dealing with the tip of the iceberg,” said Stephen Innes, managing partner at SPI Asset Management, in a note to clients.
Major currencies were weaker against the US dollar in European and US trade. The Euro held between US$1.0945 and US$1.1000 and was near US$1.0985 at the US close. The Aussie dollar fell
from highs near US75.38 cents to lows near US74.66 cents and was near US74.90 cents at the US close. And the Japanese yen eased from 123.04 yen per US dollar to JPY125.03 but was back near JPY123.89 at the US close.
European sharemarkets were mixed on Monday. Leading the gains were automakers (+0.8%), utilities (+1%) and construction (+0.5%). Oil stocks fell 2.1% in line with a lower oil price. Shares in
Barclays fell 4.1% after disclosing around a 450 million pound (US$591.80 million) loss on mishandled structured products. The pan-European STOXX 600 index rose by 0.1%. The German Dax
index lifted by 0.8% but the UK FTSE index both fell by 0.1%. In London trade, shares in Rio Tinto fell 1% but BHP shares rose 0.8%.
Japanese stocks ended lower, dragged by weakness in chemical and electronics stocks, as concerns continue about the war in Ukraine and higher costs for raw materials. The Nikkei Stock Average fell 0.7%. “The market at the moment is assuming that [higher energy prices] will moderate the pace of growth and central banks will tighten,” said Mike Bell, global market strategist at J.P. Morgan Asset Management. The degree to which central banks may increase interest rates is likely to depend on global growth and whether higher prices for energy and oil require lower rates to cushion growth, he added.
Chinese stocks closed broadly lower, as tensions between China and the U.S. continue to simmer over the Russia-Ukraine war. The Shanghai Composite Index rose 0.1%, the Shenzhen Composite Index lost 0.8%, and the ChiNext Price Index fell 1.7%. Airlines led the declines, weighed by news of a lockdown in Shanghai as Covid-19 infections continued to rise in the country. “A worsening Covid-19 situation in China, and wider restrictions, would be a serious headwind for Asian equities as a whole, ” said Oanda.