Australian shares are expected to open higher, following Wall Street’s best week since 2020.
ASX SPI 200 futures are up 0.8% to 7,323 at the time of writing.
US stocks finished higher on Friday, with all three US indexes recording big weekly gains. The markets had factored in the Federal Reserve’s interest rate rise as it looks to tackle inflation and tighten financial conditions.
The S&P 500 gained about 51 points, or 1.2%, booking a 6.2% weekly advance. The Dow Jones Industrial Average climbed 0.8% and 5.5% for the week, while the Nasdaq Composite Index rose 2.1% and 8.2% for the week.
According to Dow Jones Market Data, these were the best weekly percentage gains for each index since November 2020.
Here’s what we saw (source Commsec):
- The Euro fell from highs near US$1.1093 to lows near US$1.1000 and was near US$1.1055 at the US close.
- The Aussie dollar rose from lows near US73.60 cents to highs near US74.17 cents and was near US74.15 cents at the US close.
- Global oil prices rose as ceasefire talks between Ukraine and Russia dragged on. Restraining prices were concerns about rising COVID cases in China.
- The Brent crude price rose by US$1.29 a barrel or 1.2% to US$107.93 a barrel.
- The US Nymex crude price rose by US$1.72 or 1.7% to US$104.70 a barrel. Over the week Brent crude fell by US$4.74 or 4.2% and Nymex crude fell by US$4.63 or 4.2%.
- Base metal prices were mixed. Nickel slumped 11.9% with aluminium and zinc down 0.2%. Other metals rose by as much as 1.4%. Over the week copper rose 1.7% with zinc up 0.7%. But nickel fell 23% and other metals fell 2.8-4.1%.
- The gold futures price fell by US$13.90 or 0.7% to US$1,929.30 an ounce.
- Spot gold was trading near US$1,921 an ounce at the US close. Over the week gold fell by US$55.70 an ounce or 2.8%.
- Iron ore rose by US$4.45 or 3% to US$151.35 a tonne. Over the week iron ore fell by US$3.15 or 2%.
Australian market
Best and worst performing sectors last week
The best-performing sectors included Information Technology up over 6%, Financials up over 5% and Healthcare up over 5%. The worst-performing sectors included Materials and Energy, both down over 2% and Utilities, which was just in the red.
Best performers in the S&P/ASX top 100 stocks were REA Group Limited (ASX:REA) up over 11%, SEEK Limited up over 10% and Orica Ltd (ASX:ORI) and Aristocrat Leisure Limited (ASX:ALL), both up over 9%.
Worst-performing stocks were IGO Ltd down over 6%, Lynas Rare Earths Ltd losing over 5% and Woodside Petroleum Ltd down over 4%.
What's next for Australian stock market?
As usual, we asked Wealth Within founder and chief analyst Dale Gillham his thoughts on what to expect from the market.
“The All Ordinaries Index showed some resilience last week and in a good sign rose to its highest level in the last four weeks. While it is still too early to confirm if the market has bottomed and will start to rise, it is getting very close to that point. As such, I encourage everyone to remain patient until we see confirmation, as the streets are littered with losses from those who are impatient.
“We still need to see the market rise above the high of 7,646 points before we can be confident it will move in a sustained uptrend. If the market falls away this week, it is still possible that the last few weeks have just been a pause in the downtrend. For those who remain patient and cashed up, you will be rewarded with some high-quality low risk trades in the not-too-distant future.”
Oil & gas industry looks to work with new SA Labor Government
Australia’s oil and gas industry has welcomed the election of Peter Malinauskas’ Labor team.
The Australian Petroleum Production & Exploration Association (APPEA) has urged the new administration to recognise the role gas would play in the future decarbonised energy mix and to focus policy efforts on protecting the state’s positive investment environment.
APPEA SA director Claire Wilkinson said the industry’s long history in South Australia provided the basis for it to play a part in supporting jobs, economic activity and the community for decades to come.
“Congratulations Peter Malinauskas and Labor on receiving the endorsement of the people of South Australia,” Wilkinson said.
“At the start of this new term, there is a massive opportunity for South Australia to maintain the positive economic momentum – but we need to keep the policy settings conducive to encouraging investment and creating jobs.
“Reliable and affordable natural gas plays a critical role in lowering emissions and underpins technologies that will help us achieve a cleaner energy future. We look forward to working with Premier Malinauskas and his team to achieve the most we can for South Australia.
“Gas is helping SA become a cleaner energy leader through efforts to deploy carbon capture use and storage (CCUS), supporting the uptake of renewables, and developing new energy sources like hydrogen.
“South Australia has already done a lot of the heavy lifting. The state already has a robust and efficient regulatory system, encouraging business investment and creating jobs.
“But this must be maintained if the state is to keep at the forefront of the industry as we accelerate decarbonisation through technology and new energy sources.”
The APPEA 2022 South Australian Election Platform recommended the next government ensure ongoing investment and reliable energy supply; reduce emissions and support a cleaner energy future; and maximise local benefits.
Temporary fuel relief
Federal Treasurer Josh Frydenberg has flagged a temporary cut to the 44-cent fuel excise to release pressure at the bowser. However, he will not freeze the automatic indexation of the fuel excise due in August.
He told news.com.au: “The main thing I would say is what we will do will be temporary and it will be targeted and that’s all I can say.
”A change in the fuel excise does affect people who purchase fuel.”
US markets
Ten of 11 S&P 500 sectors rose with only utilities in the red at -0.9%. Shares in US delivery firm FedEx (NYSE:FDX) fell almost 4% after a weaker-than-expected quarterly earnings report.
Housing affordability in America drops
US house sales have dropped significantly in the last month, with affordability becoming increasingly more difficult.
According to a report by The National Association of Realtors (NAR), existing home sales dropped 7.2% in February to a seasonally adjusted annual rate of 6.02 million, a larger fall than analysts had expected.
“Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases,” NAR chief economist Lawrence Yun said.
“Some who had previously qualified at a three per cent mortgage rate are no longer able to buy at the four per cent rate.”
The median existing home price continued to rise, up 15% to $357,300 from the same month in 2021.
European markets
Finished firmer on Friday. Investors digested talks between the US and Chinese leaders. Supporting sentiment was news that Russia paid US$117 million in interest on two sovereign dollar bonds. The pan-European STOXX 600 index rose by 0.9%. The German Dax index rose by 0.2%. And the UK FTSE index added 0.3%.
In London trade, shares in Rio Tinto rose by 0.5% and BHP shares gained 0.4%.
“Investors continue to keep an eye on geopolitics but focus is turning now more to margins, how commodities will hit businesses and expected estimates revisions,” said Patrick Nielsen, deputy general manager at Mapfre Asset Management.
“We have a more cautious view on equities now, but expect markets to be in a range for a bit as we have already seen the bottom of the declines, as long as the war doesn’t take a more negative turn.”
Italy to tax extra energy profits
Italy will tax the extra profits made by energy firms, as energy prices continue to spike and families and businesses struggle with bills.
“Let’s tax a part of the extraordinary profits that producers are making thanks to the increase in the cost of raw materials, and redistribute this money to businesses and families who are in great difficulty,” Prime Minister Mario Draghi told reporters.
Economy and Finance Minister Daniele Franco said the tax would be 10% on a portion of the extra profits made.
Further details are still to come.
The tax would be a measure of extra profits made in the last six months and will help fund a new 4.4 billion-euro package to ease the pain of high energy prices, Draghi said.