7 MAR 2022 – Monday Market Highlights – Transcript

Nick Morgan
Good morning. It’s Monday, the seventh of March and I’m Nick from Milford. Globally, focus remains on the incredibly unfortunate war occurring in Eastern Europe. With escalating tensions continuing to have major implications for commodities, and in particular, global energy markets. The Bloomberg commodity index was up 11% over the week, the most since its inception in 1960. Crude oil prices continue to rise as fears of sanctions drove refiners to avoid taking on Russian oil. LNG prices skyrocketed in Europe due to supply disruptions and gas pipes being shut off. There were also nuclear concerns late in the week as Ukraine’s largest nuclear power plant was set on fire during a Russian attack. Prices for wider commodities such as palladium and aluminum also rocketed with the global sanctions being the catalyst. Russia accounts for approximately 40% of global palladium production, which is a critical component in automobiles used primarily to reduce carbon emissions from exhausts. Moving to the US non farm payrolls are released on Friday, with the US adding 678,000 jobs in February, a very strong print and exceeding market expectations of 400,000. The unemployment rate compressed to 3.8% versus 3.9% expected. This job growth was widespread. However, unsurprisingly it was led by services sectors, such as leisure and hospitality. The US I assume services data was also out last week, falling for the third month in a row to 56.5 down from 59.9 in January. That disappointing rating was well below consensus of 61 and pointed to the slowest growth in the service sector in the year. As a reminder, when this index is above 50, it still means index components are expanding just at a slower rate than the prior month. Continuing in the US Fed Chair Jerome Powell made clear during his congressional testimony on Wednesday, that the US economy no longer needs such accommodative monetary policy, and that he was inclined to support a 25 basis point hike at the mid March meeting. Powell confirmed he is willing to do whatever it takes to protect price stability, ie keep a lid on inflation. However, he also acknowledged the uncertainty that the war in Ukraine creates from monetary policy and noted that the Fed will have to be nimble. Moving to Australia. On Tuesday, the RBA hosted their monthly monetary policy decision. This turned out to be a bit of a non event and no changes were announced. The focus remains on the March quarter CPI print to be released in April. Turning to equity news. Last week, markets sold off globally largely due to continued geopolitical instability and expectation of tighter monetary conditions. The ASX was down 0.57% The s&p 500 was down 0.6% and the NASDAQ was down 1.9%. In addition to economic sanctions, large cap global companies continue to impose sanctions on Russia, including Microsoft, Apple and IKEA, all shutting down operations and sales to Russia and other businesses such as BP announcing the intended divestment of Russian assets. locally. Equity news was relatively light last week as reporting season draws to a close. An interesting development was INGOs decision to walk away from a proposed deal to buy a glimpse was CSA Coppermine in New South Wales. The stock proceeded to trade strongly on the back of this news, rallying 6.7% On the day, and ending the week up 11.5%. On Friday, s&p also announced a quarterly index changes for the various Australian indices. Change is worth noting with the removal of ended stocks, Spark and Sky City from ASX 200. Another point to note was the Adventist group and home code daily needs to read were not added like most expected, this is likely due to the settlement date of the merger. Finally, block previously known as square, who now owns afterpay It was removed from the ASX 20. Looking to the week ahead, domestically, we have Westpac consumer confidence out on Wednesday, which will give a good barometer on how consumers perceive the current and future financial positions. Remember, if the index is over 100 indicate optimism outweighs pessimism. We also have the US CPI print for February out on Friday, and the market anticipates this to continue rising. headline inflation is expected to be 7.9% up from 7.5% in January, and core inflation is expected to be 6.4% up from 6% in January. Finally, we can expect the European Central Bank interest rate decision which is anticipated to remain unchanged at 0%. Thanks for listening. We’ll see you next week.