Early pressure as Europe’s energy crisis weighs – The Market Herald

The new week is expected to start where the old one ended, with stock prices under pressure following losses in the United States.

Wall Street closed a third straight week of losses with further declines on Friday as the jobs numbers on target did not reassure investors bracing for a long weekend. US stock exchanges remain closed tonight for Labor Day.

ASX Futures Contracts fell 16 points or 0.24%, signaling continued pressure on the S&P/ASX 200 after its worst week since mid-June.

Iron ore and copper hit five-week lows on Friday as China battled Covid outbreaks in several cities. Oil pared a large weekly loss. The dollar slipped below 68 US cents this morning.

Wall Street

Early gains evaporated as fears of an energy recession in Europe overshadowed strong jobs data in the United States. Major indexes reversed after Russian gas giant Gazprom said it would miss a weekend to resume supplies to Europe.

The Dow Jones Industrial Average went from a gain of 370 points to a loss of 338 points or 1.07%. The S&P500 lose 43 points or 1.07%. Friday’s close was the index’s weakest since July.

The Nasdaq Compound fell 154 points or 1.31% for a sixth straight loss, the worst benchmark streak since 2019.

The market made gains early on thanks to the rise in the unemployment rates and monthly online employment growth eased concerns about this month’s rate meeting. The economy created 315,000 new jobs last month, matching growth expectations of around 318,000. The unemployment rate fell from 3.5% to 3.7%, a possible increase in the sign rate could have an effect.

“It looks like a Goldilocks number, it’s sort of where the expectations were,” Larry Cordisco, co-lead portfolio manager of the Osterweis Growth and Income Fund, told MarketWatch.

Treasury yields fell as bond traders reduced bets on an aggressive rate hike. The yield on two-year Treasury bills fell 12 basis points. Rising yields have been a major headwind for equities all past week.

The market turned negative after the Russian state-controlled monopoly producer Gazprom announced that it would miss the Saturday deadline to restore gas supplies to Europe. The Nord Stream 1 pipeline under the Baltic Sea had been closed for three days last week for maintenance. The operator gave no timeframe for completing repairs to a leaking turbine.

Siemens Energy said the turbine leaks should not affect the operation of the pipeline. European politicians have accused Russia of using the issue as a economic weapon.

“This is part of Russia’s psychological warfare against us,” tweeted Michael Roth, chairman of Germany’s parliamentary foreign affairs committee.

US stocks have fallen for three consecutive weeks, with rising bond yields underscoring recession fears. The S&P 500 lost 3.29% last week. The index has fallen about 7% since Federal Reserve Chairman Jerome Powell warned of “pain” for businesses as the central bank waged a war on inflation.

The Dow lost 2.99% last week. The Nasdaq Composite lost 4.21%.

Australian Perspectives

The S&P/ASX 200 looks set to open to a new five-week low after the toughest week for investors since the June selloff. However, the futures action suggests limited appetite for a significant decline this session.

A US Market Holiday tonight may give the Australian market some respite. Today’s Asian and European action will likely set the tone through Wednesday morning.

That said, the dollar started the new week under pressure, falling 0.32% this morning to 67.77 US cents. A falling dollar undermines market valuations for holders of other currencies.

Friday’s drop ASX Futures Contracts was limited by a rally in US energy stocks and a flat close for the materials sector. Index heavyweights BHP and Rio Tinto rallied in foreign trade (see below).

United States energy the sector rebounded 1.81% as crude rebounded. Materials came second with a low loss of less than 0.1%. Declines in other sectors ranged from 0.83% (financial services) to 1.85% (communication services).

A big week ahead for national events that will move the market. The key event is tomorrow Reserve Bank meetingwhere the bank is expected to raise the target cash rate by 50 basis points from 1.85% to 2.35%.

The rate statement accompanying the announcement will be scanned for hints of how high official rates will be before the central bank pauses to assess the impact. RBA Governor Phillip Lowe can also use a speech on Thursday to shed some light on the outlook for rates.

Fourth trimester GDP the next day’s numbers could affect the bank’s thinking if they fall short of expectations or surprise on the upside.

The week begins with national reports on construction, retail sales, job openings and corporate earnings. A report on service sector activity arrives on Wednesday, followed by trade figures on Thursday.

Abroad, the OPEC+ oil cartel is holding a meeting tonight. Economic data is quite light in the United States this week. A panel discussion involving Fed Chairman Powell on Thursday night could be a highlight. China releases services data today, trade figures on Wednesday and inflation indicators on Friday.

Dividend payments looming as a major headwind this week. Among the largest ex-dividend stocks are: Fortescue Metals, Altium, Bendigo Bank, Ramsay Health Care, Iluka and NIB (today); CSL, CBA, NAB, BlueScope Steel, Origin Energy and Sonic Healthcare (Tuesday); ANZ, Brambles, Amcor, Healius and SEEK (Wednesday); Woodside, ASX Ltd and Perpetual (Thursday); and Nine Entertainment, WiseTech, Perseus, Chorus and HUB24 (Friday).

Revenue Updates continue this week. Among the latecomers are Syrah Resources, Strike Energy and Buru Energy on Wednesday, Sigma Health and Highfield Resources on Thursday and Atrum Coal and Allegiance Coal on Friday.

IPOs: The ASX has two potential lists in pencil for this week. Terra Uranium and Atlantic Lithium are both set to launch on Thursday.

Goods

Iron-ore slipped to a five-week low in Chinese trade as Covid lockdowns stifled demand. Authorities imposed restrictions in Chengdu, Shenzhen and Dalian last week.

“There are growing concerns that the government’s stimulus package will be ineffective as lockdowns tarnish the normal peak building season in September and October,” said ANZ senior commodities strategist Daniel Hynes.

The most traded contract on the Dalian Commodity Exchange fell 5.1% before narrowing its loss to 2.8% at 667.50 yuan. The spot price of ore landed at Tianjin fell US$1.05 or 1.1% to US$95.34 per tonne. For the week, the spot price fell 9.5%.

Copper also hit a five-week low on the London Metals Exchange before tipping to a 0.5 percent gain to US$7,691 a tonne. Aluminum fell 0.2%, lead 0.7% and zinc 4.5%. Nickel gained 1.1% and tin 0.5%.

BHPBritain’s ‘s quote rebounded 2.53% during a buoyant session in Europe. The miner’s US-traded certificates of deposit gained 0.66%. Rio Tinto edged up 0.28% in the US after adding 2.02% in the UK.

WE gold diggers rebounded with metal prices. The NYSE Arca Gold Bugs Index rose 3.66%, with gold for December delivery at US$13.30 or 0.8% ahead at US$1,722.60 an ounce.

The rally came after the yellow metal hit a three-week low on Thursday. For the week, gold prices lost 1.6%. Silver lost 4.6% for the week after rebounding 1.2% on Friday from a two-year low.

Oil posted a sharp loss for the week ahead of a meeting this evening of the Organization of the Petroleum Exporting Countries and its allies. Brent crude stood 66 cents US or 0.7% ahead at US$93.02 a barrel. For the week, the international benchmark lost almost 6.1%.

Mary I. Bruner