The Australian stock market ended its 5-day winning streak, closing higher for the week to record its best weekly performance in a month.

Stocks fall, safe havens rise

Weakness in Australian stocks worsened following news of a fire at Ukraine’s largest nuclear power plant after Russian bombardment around midday. Investor concerns over high radiation levels were allayed after emergency services confirmed on Facebook that the blaze had not affected critical equipment and no casualties were injured. The news was enough for the ASX 200 to stage a rally to mitigate its losses at the closing bell.

As stocks tumble and safe havens rise, commodities are set to see their biggest rally since 2020, while Russia’s stock market remains closed for the country’s longest shutdown.

After a weak lead from Wall St, the performance on the local stock market also had a defensive feel. Consumer staples were the best performer, rising 1.2%, thanks to their ability to pass on higher costs to consumers. Gains were seen in classic bond proxies such as utilities adding 0.7% and healthcare gaining as Asia-Pacific Treasuries yields fell, except of South Korea after announcing a record number of Covid-19 cases.

Information Technology led the losses, down 3.6%, followed by Consumer Discretionary and Energy, both wiping out 1.1% each. Real estate and financials followed lower. Materials lost the least, down 0.4%, but in a broader context the sector recorded its best week since April 2016 with a spectacular gain of 8.1%.

CSL & Piedmont Lithium Rally

CSL (ASX:CSL) added 0.3 percent to $253.80 after learning that its offer period to buy back Vifor Pharma shares had closed with 74 percent of the shares tendered. The biotech giant has signaled that its regulatory approval for the takeover is on track, suggesting that the remaining conditions will be met. The deal is expected to be finalized by the middle of this year.

Lithium Developer Piedmont Lithium (ASX:PLL) rose 6.7% to 80 cents as investors appreciated news that its partner, Sayona Mining (ASX:SYA) doubled its lithium resource estimate for Sayona Quebec for the North American Lithium and Authier projects. Piedmont Lithium holds a 25% interest in the North American Lithium and Authier projects.

The market jolt reverberated with the strongest effects seen in European markets as Wall St futures head south. Investors are worried about what this means for inflation as central banks walk a fine line to hunt down inflation and not punish growth.

Risk of recession?

Jim Bianco wrote about Twitter that “not all recessions are caused by a 50% rise in crude oil. But every 50% rise in crude has led to a recession.” So part of what is causing recession risk has been the spike in commodity prices. This therefore raises the following question: are the markets on the right track?

Asian markets are weak with the Japanese Nikkei out of session after falling around 3% in the morning, while Hong Kong Hang Seng is trending lower, dragged lower by tech stocks. Meanwhile, China is set to unveil its lowest economic growth target in more than three decades when top leaders gather tomorrow for a key policy meeting. The move is expected to put pressure on the government to step up fiscal stimulus to boost demand and employment.

What awaits us

Investors are now bracing for the big jobs report tonight after Fed Chairman Jerome Powell advocated a 25 basis point hike this month at his next Fed meeting after testifying before the financial legislators. Mr Powell recently told Congress that the labor market was “extremely tight” as the unemployment rate fell slightly to 3.9%, although he expected annual wage growth to rise.

After 467,000 jobs were added to the US economy in January following its revision, economists expect 400,000 jobs for February.

At the close, the S&P/ASX 200 was down 0.6% or 40.60 points at 7110.80. During the week, the local stock market is up 113 points or 1.6%.

wall street

Over the past four trading days, the Dow Jones lost 0.8%, the S&P 500 lost 0.5% and the Nasdaq lost 1.2%.

Futures contracts

Dow Jones futures point to a drop of 187.00 points.
S&P 500 futures point to a fall of 27.00 points.
Nasdaq futures point to a drop of 97.00 points.
SPI futures are pointing to a 35 point drop the next time the market opens.

Best and Worst Performers

The best performing sector was consumer staples, up 1.2%. The worst performing sector was information technology, down 3.6%.

The best performing stock in the S&P/ASX 200 was Perseus Mining (ASX: PRU), closing up 3.1% at $1.82. It was followed by shares in Newcrest Mining (ASX:NCM) and gold road resources (ASX:GOR).

The worst performing stock in the S&P/ASX 200 was Paladin Energy (ASX: PDN), closing down 14.5% at $0.73. It was followed by actions in Block (ASX:SQ2) and PolyNovo (ASX:PNV).

Asian markets

The Japanese Nikkei lost 2.34%.
Hong Kong’s Hang Seng lost 2.64%.
China’s Shanghai Composite lost 0.80%.

Commodities and the dollar

Gold is trading at US$1,936.12 per ounce.
Iron ore is 5.5% higher at US$153.00 a tonne.
Iron ore futures are pointing up 2.1%.
Light crude is trading $1.36 higher at US$109.03 a barrel.
One Australian dollar buys 73.53 US cents.