Only one real issue for markets this week – the still spreading impact of Putin’s invasion of Ukraine and the way in which it and the sanctions applied by the West have ignored a surge in commodity prices the like of which we have not seen before for its breadth.
An attempt at a small humanitarian cease fire in a couple of Ukrainian cities failed as Russian troops failed to honour the terms and hostilities were resumed.
Major markets saw investors take a lot of damage – which was hard to avoid unless you were an Australian sharemarket investor and enjoyed a rise of 1.6% – thanks to our strong suite of key commodity exports.
Europe remains a concern for many investors and data released on Friday showed a five year high of $US6.7 billion flowing out of European shares last week.
That helps explain the 7% plunge in Eurozone shares last week, including the 3.6% slump on Friday alone.
Other markets were rattled as well – but not Australia, US shares fell 1.3% for the week, Japanese shares lost almost 2% while Chinese shares lose 1.7%.
The Australian market firmed because investors saw we would be one of the few countries to benefit from the surging prices for oil and gas, copper, zinc, lead, wheat, iron ore, nickel and tin, iron ore and coal.
The usual list of local resource companies will again attract the most attention today as they did this week – BHP, Rio Tinto, Oz Minerals, Sandfire, Iluka, Evolution, IGO, Northern Star, Newcrest, Santos, Woodside, Beach Energy and more.
US West Texas Intermediate oil price was back to near $US116 a barrel and Brent just on $US119 a barrel, while copper ended the week closer to $US5 a pound than at any other time in history (See separate commodities wrap).
Despite the poor global lead on Friday, ASX 200 futures ended up 28 points, or 0.4% at the close early Saturday, Sydney time, helped by higher commodity prices and a rise in the value of the Aussie dollar (closing in on 74 US cents).
Which implies that, unless there’s some major development on Sunday night or Monday morning in Ukraine (apart from the abortive attempt at a humanitarian ceasefire), then the ASX should start firmly in the green.
Bond yields fell on safe haven buying (the US 10-year yield tumbled to just over 1.73% at the close on Friday (it was more than 1.92% at the start of the week) – helping offset concerns about higher inflation ahead of the US Federal Reserve’s two day meeting and rate rise this week and then the release of the Consumer Price Index for February which is forecast to show another rise (as will March’s CPI in a month’s time).
Wall Street’s fall was less as Europe’s dependence on Russian energy and its proximity to Ukraine has slammed the continent more than other parts of the globe.
That saw the Dow lose 0.53% on Friday, the S&P 500 drop 0.79% and the Nasdaq Composite drop off 1.66%.
For the week the Dow fell 1.3% to 33,614; S&P 500 shed 1.27% to 4,328 and the Nasdaq dropped 2.78% to 13,313
The US 10-year bond yield fell to 1.72% Friday (The yield on the Aussie 10 year remained around 2.15% which is still unrealistic)
The US rose with the dollar index up 2% over the week – but not against the Aussie dollar which was approaching 74 US cents at the close (- 73.74 US cents because we are a commodity driven currency) for a gain of 2% for the week as well and the highest the currency has been since last September.
Friday’s fall on Wall Street and more volatile movements in commodity prices will see Asian markets will start this week wobbly.
On Friday Japan lost 2.2%, South Korea 1.1%, China 0.9% and and Hong Kong 2.5%.
Events over the weekend will see an uncertain start in Asia today and Australian investors will be wondering if Friday’s rise in the futures can hold out against the continuing flow of negative news from Ukraine.
