Having referenced Russia’s troop deployment into the Donbas region of Ukraine as “the beginning of an invasion”, US President Joe Biden announced several sanctions against Moscow that targets two of its banks, its sovereign debt and wealthy individuals.
Meanwhile, Germany stopped moves to open the $US11 billion Nord Stream 2 subsea pipeline, owned by Russian state-backed energy company Gazprom, which was set to double direct Russian gas exports to Germany.
The EU imposed restrictions on most members of Russia's Duma, and will ban the purchase of Russian government bonds and prohibit trade in new Russian debt on EU securities markets.
Finland’s Prime Minister Sanna Marin will re-evaluate the security risks for a planned 1,200-megawatt Russian-designed reactor project.
Britain sanctioned five Russian banks and three billionaires, in what Prime Minister Boris Johnson said was “the first barrage” of measures against Moscow.
Interestingly, European stocks were positive yesterday, however this rebound is expected to be short-lived.
"Given how keyed up investors had been regarding the developments in eastern Europe, the lack of any full-on conflict in eastern Ukraine has provided the chance for markets to edge higher,” said Chris Beauchamp, chief market analyst at online trading platform IG.
The tension sent the Dow industrials tumbling 500 points and the S&P 500 and Nasdaq Composite into correction territory – the first such decline since 2020.
The S&P 500 index closed down 1% to finish at about 4,305, the Dow Jones Industrial Average fell 1.4% to around 33,597 and the Nasdaq Composite Index closed down 1.2% to roughly 13,382.
There was bullish sentiment prior to the US having a day off on Monday, however, when investors returned they turned their attention to selling consumer discretionary stocks. The energy sector was another loser falling 1.5%.
All that negativity doesn’t seem to have translated to the ASX today.
The local market has risen today on broad gains.
The S&P/ASX200 gained 36.50 points or 0.51% to 7,197.80. Over the last five days, the index has lost 1.20% and 5.24% over the last 52 weeks.
The top performing stocks in this index are Tyro Payments Ltd up 9.60% and Zip Co Ltd (ASX:Z1P) up 9.14%.
Tyro is an interesting case.
The company was down 33% at the start of the week on the back of its half yearly.
Today, it hit an intraday high of $1.62 and is currently up 9.1% to $1.58.
That said, it was $2.20 on Friday before it crashed on Monday.
Wage Price Index rises
The latest Australian Bureau of Statistics (ABS) quarterly Wage Price Index has revealed for the December quarter of 2021:
- Wages rose 0.7% this quarter and 2.3% over the year.
- The most significant industries to contribute to growth this quarter were Health, care and social assistance (0.6%), Retail trade (1.2%) and Public administration and safety industries (0.7%).
- Queensland recorded the highest quarterly rate of growth across Australia (0.8%).
- Victoria, South Australia, Western Australia and the Northern Territory all recorded the lowest quarterly growth of 0.5%.
CreditorWatch Chief Economist Harley Dale has given his take on the results.
“With the Reserve Bank of Australia (RBA) making it crystal clear that it won’t raise official interest rates until signs of sustainable wage inflation emerge, the quarterly Wage Price Index (WPI) is perhaps the most important economic metric of 2022.
“To put it simply, today’s stats show nothing much has moved. It’s a positive, albeit small, story for the Health Care and Social Assistance sector.
"CreditorWatch data has consistently highlighted the health sector as one of the least at risk of credit default. This is largely due to the dominance of governments’ involvement in combatting the pandemic.
"However, these actions have understandably crowded out some private health activity, including non-public operators, who may normally undertake some elective surgery within the public hospital system. That equals wage pressure.
“Retail Trade is faring as badly as many expected and we should see a continued upward trend here as restrictions ease across Australia. The CreditorWatch Business Risk Index has consistently highlighted the dilemma faced by retail as lockdowns and mixed messages have created angst and credit risk to this front-line Australian industry.
"Retail was just getting back on its feet only to be hammered by Omicron in December 2021 and into 2022. There has been much COVID-related structural damage done to Australia’s retail labour force over the summer period and this is showing up in wage pressure due to a lack of readily available skilled labour.
“Some may take today’s update as a signal of an early rate rise and there is some devil in the detail. That is the purview of the RBA - nobody else knows.”
Will interest rates rise on wages growth?
Not according to RBC Australia chief economist, Su-Lin Ong who says Australia's wages growth is "moving in the right direction but not strong enough yet for the RBA".
Public sector wages rose 0.7% quarter on quarter – the fastest quarterly pace since late 2018. The cause: a headwind from public sector wage restraint including the end of wage freezes in some states.
Private sector wages including bonuses rose by 1.2% Q/Q, taking the Y/Y rate to 3%, the fastest pace since 2012.
"We don’t usually look at this measure but the recent shift in RBA communication suggesting that it is looking at a broader suite of wage metrics beyond the WPI, including bonuses, suggest that these data may garner more attention going forward," Ong said.
AGL wants $1 billion more
Energy giant AGL Energy (ASX:AGK) has told the Mike Cannon-Brookes-led consortium that it will need at least another $1 billion, if it wants its acquisition bid to be taken seriously.
AGL chief executive Graeme Hunt even went as far as slamming the consortium’s early coal retirement plan as unfeasible.
“If you want to build something in a shorter period of time, it might be possible but not in a period of eight years,” AGL‘s chief operating officer Markus Brokhof said.
The Morrison government is also understood to be planning an intervention if the consortium bid becomes successful.
JP Morgan analyst Mark Busuttil believes intervention would be likely a takeover was successful.
“Given AGL represents more than 20% of National Electricity Market generation supply, we believe government intervention is likely if the acquirers intend to close the generation assets early,” Busuttil said.
Competition regulator approval may also become an issue given Brookfield’s ownership of AusNet Services.
“We believe there is no precedent for Australian regulators allowing vertically integrated private ownership across all four components of the electricity supply chain. If the consortium’s proposal were allowed, it would see Brookfield own a controlling interest in: the largest generator in Victoria Loy Yang A, the entire Victoria electricity transmission network, the largest of five Victorian electricity distribution networks and the largest retail portfolio in Victoria,” UBS analyst Tom Allen said.
“The ACCC — and the Competition and Consumer Act — have the legislative instrument to address cross-ownership in the context of a merger/acquisition. While not insurmountable, we expect the ACCC‘s review would be complex and introduce material approval risk.”
As for shareholders.
“Typically, for a change of control of a company, shareholders are looking for a premium 30-40 plus per cent over whatever the appropriate share trading range is for the company,” Hunt told The Australian.
“There isn’t a sensible offer available to the company which would cause the board to reconsider its position.”
On the small cap front
- Okapi Resources Ltd finished 5.88% higher.
- CV Check Ltd finished 13.64% higher.
- Marvel Gold Ltd finished 4.17% higher.
- Aeris Resources Ltd finished 5.38% higher.
- Evolution Energy Minerals Ltd finished 9.30% higher.
- Montem Resources Ltd finished 14.29% higher.
- Critical Resources Ltd finished 2.63% higher.
- PolarX Ltd finished 5.71% higher.
- Race Oncology Ltd finished 3.57% higher.
- Yandal Resources Ltd finished 1.75%.
- St George Mining Ltd finished 4.44% higher.
- Archer materials Ltd finished 1.49% higher.