The ASX is expected to open lower to start the new trading week. ASX SPI 200 futures have declined 0.5% to 7075.
It follows a sell-off in the US on Friday after White House National Security Adviser Jake Sullivan warned that a Russian invasion of Ukraine could happen "any day now."
The Dow Jones Industrial Average dropped 504 points, or 1.4%, to close near 34,737, while the S&P 500 fell around 86 points, or 1.9%, ending near 4,418. The Nasdaq Composite lost around 394 points, or 2.8%, to finish near 13,791.
The situation in the Ukraine will heighten further this week and has already lifted oil futures and provided support for traditional safe havens, including gold and Treasuries.
Friday’s fall left the Dow down 1% for the week, the S&P 500 down 1.8% and the Nasdaq off 2.2%.
Both the Ukraine tensions and concerns over aggressive interest rate rises are spooking investors and that has a way to play out yet.
Comerica (NYSE:CMA) Wealth Management chief investment officer John Lynch says, “We expect a significant bid for US Treasuries, putting demand for yield in direct conflict with the Fed’s intentions. Commodity prices may also accelerate, led by oil and gold. The dollar may also catch a safe haven bid, accelerating commodity inflation. The degree and extent of the conflict will also determine the intensity of the Fed’s tightening plans.”
Here’s what we saw (source Commsec):
- The Aussie dollar rose from near US71.10 cents to US71.80 cents and retraced to US71.35 cents at the US close.
- Global oil prices rose by more than 3% to 7-year highs on fears of conflict in Ukraine. Reuters reported that the International Energy Agency raised its 2022 demand forecast and expects global demand to expand by 3.2 million barrels per day (bpd) this year, reaching an all-time record 100.6 million bpd.
- Brent crude price rose by US$3.03 or 3.3% US$94.44 a barrel.
- US Nymex crude price rose by US$3.22 or 3.6% to US$93.10 a barrel. Crude prices rose for the eighth straight week with Brent crude up by US$1.17 or 1.3% while Nymex rose by US79 cents or 0.9%.
- Base metal prices were weaker on Friday with copper down 4% while lead fell just 0.2%. Over the week all metals rose except nickel (-0.1%) with lead up 4.4%.
- The gold futures price rose by US$4.70 or 0.3% to US$1,842.10 an ounce.
- Spot gold was trading near US$1,860 an ounce at the US close. Over the week gold futures rose by US$34.30 or 1.9%. Iron ore fell by US$3.60 or 2.3% to US$1.
Australian market
We will see earnings results from Aurizon Holdings Ltd (ASX:AZJ); Beach Energy Ltd; Bendigo & Adelaide Bank Ltd; Boral; Carsales.com Ltd; GPT GROUP (ASX:GPT); JB HI-FI LIMITED (ASX:JBH) and Keypath Education International Inc. today. Later this week, the RBA will release its Board minutes, while labour market data is due on Thursday.
“Labour market data for January looms large on Thursday, but omicron impacts will cloud any interpretation,”, National Australia Bank Ltd markets economist Taylor Nugent wrote.
“NAB forecasts an unemployment rate unchanged at 4.2% and flat employment, though there is the risk that the unemployment rate falls sharply if those normally termed unemployed gave up searching for work during disruptions from omicron.
“Forward indicators of the labour market remain very strong and we expect the labour market to rebound sharply and continue to tighten over the coming months.”
JB Hi-Fi’s sales fall
JB Hi-Fi has seen a 1.6% fall in total first half sales to $4.86 billion.
While online sales were strong, up 63% to $1.1 billion, they weren’t enough to arrest the fall with stores closed.
The electrical retailer is also planning a $250 million off-market buyback.
Group CEO Terry Smart said "elevated demand" across all of JB Hi’-FI’s sales channels was positive.
“While it remains an uncertain retail environment, we will continue to stay focused on what we can control," Smart said.
"Our highly engaging in-store and online shopping experiences… and our continued focus on leveraging our scale to deliver great value will ensure we meet our customers’ needs during these challenging times.”
Earnings before interest and taxes fell 9.1% in the six-month period to $420.5 million while net profit slid 9.4% to $287.9 million.
The company plans to return $437 million to shareholders via the interim dividend and the $250 million off-market buyback.
US markets
The US has reportedly massed more than 100,000 troops near the Ukraine border, with White House national-security adviser Jake Sullivan saying a Russian invasion of Ukraine could begin “any day now”.
Sullivan said that Russian President Vladimir Putin is yet to make a final decision and Putin has stated that the West is jumping to conclusions, however, as with Australia’s government, Sullivan has warned citizens to get out.
“Any American in Ukraine should leave as soon as possible, and in any event in the next 24 to 48 hours,” Sullivan said.
“Whatever happens next, the West is more united than it has been in years,” he said.
One would be forgiven for thinking ‘Them’s fightin’ words’.
In general trading, nine of 11 S&P500 sectors fell. Technology fell 3% with Amazon down 3.6%, Microsoft down 2.4% and Apple down 2%.
European markets
Britain’s economy is enjoying a renaissance and reported a 7.5% growth for last year as pandemic issues eased.
However, analysts have warned that sky-high inflation clouds the 2022 outlook.
Britain’s economic expansion was the fastest seen since 1948, but follows a record slump of 9.4% in 2020 – a trend that was felt across the globe.
The country is now readying itself for a full scape economic and social comeback as the government looks to scrap the legal requirement to self-isolate after testing positive for Covid-19 later this month if infection levels remain stable.
The FTSE ended Friday 0.2% lower. The FTSE 100 has outperformed the pan-European STOXX 600 index this year, thanks to its heavy weighting towards banking and commodity stocks.
The FTSE 100 was up 1.9% and the FTSE Mid 250 was up 1.6% for the week.
“The last month of the year wasn’t all doom and gloom ... and looking over the last quarter as a whole, there’s plenty to be positive about,” financial analyst at AJ Bell Danni Hewson said.
On the market side, technology stocks fell the most, down 2.2% in response to higher bond yields. Car makers were mixed with Volvo down 4.7% while BMW rose 2.7% and Mercedes advanced 6.7%.
The pan-European STOXX 600 index fell by 0.6% but added 1.6% over the week - the biggest gain since late December.
The German Dax index fell by 0.4%.
In London trade, shares in Rio Tinto fell by 1.4% while BHP lost 2.4%.