Dip buyers scoop up Wall St’s rise, Oil tumbles 11%, Rio trades ex-div: ASX to lift

 

Wall St, European markets, and the ASX staged a rebound as dip buying emerged in oversold conditions. Investors bet that Russia and Ukraine could reach truce through diplomatic means. Oil price plunges 11%. Rio Tinto (ASX:RIO) and South32 (ASX:S32) trading ex-div today.

Good morning. The bulls are back for now. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to rise as the sell-off comes to an arrest.

US stocks snap 4-day losing streak

The relief rally surged as investor’s risk appetite grew. Dip buyers scoped up bargains with optimism on Wall St, European markets and in Australia.

Commodity prices have retreated from their record highs after conflict between Russia and Ukraine escalated. Prices fell after reports that the United Arab Emirates will push for fellow OPEC members to hike oil production. The move is set to ease pressure on the global oil supply caused by the Russian sanctions slapped from the West.

Imminent peace talk helps boost optimism

Meanwhile, trader’s confidence is slowly on the mend after Ukraine said that they’re no longer pressing for NATO membership. With talks that they’re open to compromise on two breakaway pro-Russian territories, Luhansk and Donetsk.

Gold prices fell sharply as money went back into risk assets, following the first significant pullback with commodity prices since the invasion.

Meanwhile job openings in January fell slightly from the month prior but stayed above 11 million. The number of employees quitting their jobs fell to it's the lowest level since October.

Oil’s premature sell-off?

Given that the Nymex fell almost 11 per cent in today’s session, the sell-down appears to be quite hasty as the risk of short term supply disruption is still quite high. Like yesterday, we saw traders in the “buy-the-rumour, sell-the-news” mode which saw the price of oil rally almost 7 per cent before President Biden officially put a sanction on Russian oil and commodities.

However, since all of this is in progress, investor’s risk appetite can be alloyed as Ukraine deputy chief of staff Zhovka said that “we will not trade our territories – not a single inch” as reported by Bloomberg.

So despite imminent talks between Russia and Ukraine, the relief rally in these oversold conditions could be hindered if truce does not unfold from this. Remember both counterparts have their own agenda, so this pullback we’re seeing could be premature. Let’s see what actually happens.

Figures around the globe

At the closing bell, the Dow Jones gained 2 per cent to 33,286, the S&P 500 jumped 2.6 per cent to 4,278, its best day since June 2020, while the Nasdaq soared 3.6 per cent at 13,256, snapping a four day losing streak.

Across the S&P 500 sectors, energy and utilities were the biggest laggards, a reversal of what we have seen for the week, down 3.2 per cent and 0.8 per cent. Information tech spiked 4 per cent, financials was also a winner, up 3.6 per cent followed by communication services.

The yield on the 10-year treasury note rose 9 basis points to 1.94 per cent, gold and the greenback both weakened.

Across the Atlantic, European markets closed higher. Paris skyrocketed 7.1 per cent, Frankfurt rallied almost 8 per cent, its best gain since March 2020, and London’s FTSE added 3.3 per cent.

On the London Stock Exchange, Rio closed 1.2 per cent lower, BP fell 2.2 per cent and Shell fell 1.7 per cent.

Europe's Stoxx 600 jumped 4.1 per cent lifted by banks, automakers and travel stocks, surging more than 5 per cent. Adidas skyrocketed almost 15 per cent after unveiling its expectations of a sales recovery in its China business. The sportswear provider also flagged a €250m loss from self-sanctioning its Russian business. Meanwhile, UniCredit galloped almost 12 per cent and BNP Paribas rallied almost 10 per cent after flagging to investors their exposure to Russia.

Rating agency Fitch downgraded Russia’s sovereign debt to ‘C’, saying the country is in “imminent” risk of default.

Asian markets closed lower. Tokyo’s Nikkei fell 0.3 per cent amid its weak GDP growth of 4.6 per cent over the year in the fourth quarter of 2021 versus the expectations of 5.6 per cent.

Hong Kong’s Hang Seng lost 0.7 per cent while China’s Shanghai Composite dropped 1.1 per cent amid news that Norway’s US$1.3 trillion sovereign wealth fund is set to sell its stake in sportswear company Li Ning due to human rights concerns, the stock tumbling almost 3 per cent.

Yesterday, the Australian sharemarket closed over 1 per cent higher at 7,053, snapping a 3-day losing streak in a broad-based rally lifted by technology and communication services sectors.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.4 per cent gain.

Local economic news

"Australia has the opportunity to secure a lower rate of unemployment than has been the case for some decades," said Dr Lowe at the Australian Financial Review business summit yesterday.

However, Dr Lowe said that there are risks to the economy, delaying a rate hike on accelerating inflation, but he said that there’s a risk of moving too early.

The central bank is forecasting the unemployment rate to fall below four per cent later this year and stay there in 2023, a level not seen in almost half a century. The jobless rate is currently at a 13-year low of 4.2 per cent.

Today the payroll jobs and wages data for the fortnight to February 12 is set to be released by the Australian Bureau of Statistics. The figures could provide some colour on the jobs market in relation to Dr Lowe’s forecast, ahead of the February labour force figures for next week.

Ex-dividend

There are a number of companies going ex-dividend today including BSP Financial Group, Genworth Mortgage, Perpetual, Rio Tinto and South32. Both these mining giants are set to pay their biggest dividends ever.

AngloGold Ashanti (ASX:AGG) is paying 3.1425 cents unfranked
BSP Financial Group (ASX:BFL) is paying 45.0732 cents unfranked
Contact Energy (ASX:CEN) is paying 12.4849 cents unfranked
G8 Education (ASX:GEM) is paying 3 cents fully franked
Globe International (ASX:GLB) is paying 16 cents fully franked
Genworth Mortgage (ASX:GMA) is paying 24 cents fully franked
Insignia Financial (ASX:IFL) is paying 11.8 cents fully franked
Laserbond (ASX:LBL) is paying 0.6 cents fully franked
Michael Hill International (ASX:MHJ) is paying 3.5 cents unfranked
McMillan Shakespeare (ASX:MMS) is paying 34 cents fully franked
Nzme (ASX:NZM) is paying 4.6585 cents 85 per cent franked
Perpetual (ASX:PPT) is paying 112 cents fully franked
Regis Healthcare (ASX:REG) is paying 3.52 cents 50 per cent franked
Rio Tinto (ASX:RIO) is paying 662.84 cents fully franked
Reliance Worldwide (ASX:RWC) is paying 6.285 cents 20 per cent franked
South32 (ASX:S32) is paying 12.1593 cents fully franked
Shine Justice (ASX:SHJ) is paying 2.5 cents unfranked
Vulcan Steel (ASX:VSL) is paying 25.6025 cents unfranked

Dividend-pay

There are five companies set to pay eligible shareholders today.

Ava Risk Group (ASX:AVA)
Codan (ASX:CDA)
FSA Group (ASX:FSA)
SG Fleet Group (ASX:SGF)
Senex Energy (ASX:SXY)

Commodities

Iron ore has lost 2.9 per cent to US$157.55. Its futures point to a 5.5 per cent fall.

Gold has lost $45.60 or 2.2 per cent to US$1998 an ounce. Silver is down $0.88 or 3.3 per cent to US$26.02 an ounce.

Oil has fallen $13.42 or 10.9 per cent to US$110.28 a barrel.

Currencies

One Australian Dollar at 8:20 AM has strengthened from yesterday, buying 73.22 US cents (Wed: 72.72 US cents), 55.55 Pence Sterling, 84.83 Yen and 66.15 Euro cents.
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