ASX futures were up 59 points, or 0.8 per cent, to 7323 as of 8.00 am AEST, indicating a higher start to trade.
The S&P 500 climbed 1.2 percent Friday, its fourth consecutive day of gains. The Dow Jones industrial average rose 0.8%. The Nasdaq Composite rose 2 percent, also taking the index to positive territory for March.
The S&P 500 rose 6.2 percent for the week, and the Dow Jones Industrial Average added 5.5 percent, while the tech-heavy Nasdaq Composite rose 8.2 percent. All three indexes posted their best week since the week ending 6 Nov 2020 when votes were still being counted from the last US presidential election.
After weeks of volatility on US equities amid flights to safe assets and wild swings in commodity prices stemming from Russia’s invasion of Ukraine, investors are returning to them. Sentiment got a lift on Wednesday after US Federal Reserve Chairman spoke of the strength of the US economy and its durability to higher interest rates.
“The US economy is very, very well positioned in the here and now, and that’s a huge reason why the Fed feels comfortable continuing with their tightening process without potentially throwing the US into a recessionary type of environment,” said Jeff Schulze, investment strategist at ClearBridge Investments.
Softening oil prices are also relieving pressures on equities. Brent Crude oil ticked up to US$107.9 Friday, still well below the plus US$130 levels reached a week ago.
At home, the S&P/ASX 200 finished on Friday 0.6% higher at 7294.4, capping off its strongest trading week since February 2021.
Commodity stocks rallied as the oil and metals prices rose, with the benchmark adding 3.3% on the week. Energy was the best-performing sector on Friday, gaining 2.2%. Iron-ore miners BHP, Rio Tinto and Fortescue added 1.25% to 2.2%, and gold miners posted similar increases.
The financial giant notched a fifth straight gain, tying up with a 6.1% weekly advance as expectations of an RBA interest-rate increase this year ratcheted higher.
Block’s ASX-listed securities rose 7.2%, bringing its gain over three sessions to 26%.
Prices of energy and metals bounced in commodity markets: iron ore gained 3% to $151.35 per tonne; Brent Crude jumped 1.2% to $107.93; gold futures lost 0.7% to $1933.90.
On Sunday, Australia banned exports of alumina and aluminium ores to Russia. Australia accounts for almost 20 percent of Russia’s alumina, the government said.
In bond markets, US 10-Year Treasury Note yields fell to 2.15%, and the yield on the Australian 10-year bond increased to 2.57%. Yields rise when prices fall.
The Aussie extended its gain to 74.12 US cents by 8 a.m. AEST, up from previous close of 73.73. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, inched up to 91.09.
Asia
Chinese stocks close higher on Friday, continuing a strong rebound since Wednesday after top officials in Beijing pledged to support financial markets and ensure more predictable regulations. The benchmark Shanghai Composite Index was up 1.1% and the Shenzhen Composite Index added 0.6%. The tech-heavy ChiNext Price Index rose 0.1%, after tech stocks eased after two days of soaring. The insurance and property sectors were on the rise today with Ping An (601318.SS) gaining 5.3% in Shanghai after its 2021 dividend exceeded market expectations.
Hong Kong equities finished lower, as the Hang Seng Index fell 0.4%, breaking two days of gains that saw the HSI rise a total of 17%. Investor attention is shifting to the Covid-19 situation in China, Oanda said, citing evidence that Shenzhen is loosening some domestic curbs while authorities are advising people in Shanghai to return to working from home. A collection of companies topped gains, led by Ping An Insurance, which was up 4.8 percent, with Sands China and Wharf Real Estate gaining 4.2 percent and 3.9 percent, respectively. CK Hutchison gained 3.8% after its full-year results on Thursday.
Japanese stocks ended higher as uncertainty remained over the Ukraine war and its implications for commodity prices, while hopes remained for a reopening of the domestic economy. Gains are led by metal and real-estate stocks. Sumitomo Metal Mining rises 4.2% and Sumitomo Realty & Development is up 2.9%. The Nikkei Stock Average adds 0.7%. Stocks may also be reacting to headlines on Ukraine, which continue to return to the forefront for investors.
Europe
European stocks close higher as the weekend approached, shaking off interest-rate rises in the US and UK this week that were generally expected. The pan-European Stoxx Europe 600 added 0.9 percent.
“The message from the market is that inflation is going to subside, growth loss is not too severe and we can look forward to the resumption of a bull market over the next two years,” says Chris Iggo, CIO of core investments at AXA Investment Managers. But uncertainty around the war in Ukraine is great, and markets will probably remain wild, he says. “Markets are tiring at this juncture. Liquidity is poor and volatility is high,” Iggo writes.
In London, the FTSE 100 index ended Friday up 0.3 percent in a subdued end to the week, as investors considered the situation after this week’s rebound for markets.
“A lull in the calendar and lack of headlines has meant stocks are drifting for much of the day, after a week in which many markets have enjoyed decent recoveries,” Chris Beauchamp, chief market analyst at IG Group, said. But currently, there doesn’t appear to be much of a desire to sell the bounce, he said. Stocks may in fact pluck a positive from the lack of news flow, and certainly, next week tends to be relatively empty on the event front, Mr. Beauchamp said.
The Russian stock market has been closed. The country’s central bank has so far not said whether it will open next week. The central bank held its key policy rate at 20%. On Thursday the Russian state made coupon payments on dollar-denominated sovereign bonds, thus avoiding default.
“Markets were expecting a technical default of Russia, so a lot of people were baffled,” said Ludovic Subran, the chief economist of Allianz.
North America
Major US stock indexes scored their biggest weekly gain since November 2020 in response to oil prices remaining below recent highs and to the Federal Reserve’s embrace of US economic confidence.
The gains brought the S&P 500, the Dow Jones Industrial Average and the tech-heavy Nasdaq Composite back into positive territory for March, despite the high commodity prices and geopolitical fears that have dragged down stocks in recent days.
The S&P 500 closed with a gain of 6.2 percent for the week on Friday; the Dow Jones Industrial Average climbed 5.5 percent in the same period. The tech-heavy Nasdaq Composite rose 8.2%. All three indexes logged their best weekly performance since the week ended Nov. 6, 2020, when votes from the last presidential election were still being rounded up.
Big tech stocks regained some of their recent losses to aid the market move higher. Meta Platforms stock rose 15% for the week and Amazon. Msn.com rose 11% and Microsoft increased 7.3%. Shares of fast-growing companies, many of them in technology, have struggled recently as the central bank’s plans to lift interest rates cast a pall over the value of their future profits.
On Friday, the S&P 500 climbed 1.2%. The Dow Jones Industrial Average gained 0.8%. The Nasdaq Composite rose 2%.
Investors were more enthusiastic about US stocks in the wake of two weeks of losses for the S&P 500 and five weeks of losses by the Dow Jones Industrial Average. They argue that the strong fundamentals of many U.S. companies are sufficient for them to produce profits despite rising costs and increasing geopolitical uncertainty. Many think the resilient US labour market will allow consumers to continue powering the economy.
Analysts also credited a friendly tone from the US central bank, where officials this week voted to increase interest rates in a bid to rein in inflation. Fed officials including the chair, Jerome Powell, used the strength of household balance sheets and consumer spending to push back against fears that the economy might falter in the year ahead.
“The US economy is in such a great place right now, and that is a big reason why the Fed is comfortable proceeding with their tightening process without putting the US into a recessionary type of environment,” said Jeff Schulze, investment strategist at ClearBridge Investments.
Central bank officials indicated that their rate increase of a quarter of a percentage point would be followed by six more hikes this year. The move appeared to soothe concerns from some investors that inflation would take off.
“What you’re seeing is there’s a perception that the market thinks that the Fed is going to be able to tame inflation,” said Whitney Sweeney, investment strategist at Schroders.
A halt in the recent surge in oil prices reduced pressure on stocks. Brent crude, the global oil benchmark, ended Friday at $107.93 a barrel, down 4.2 percent for the week. Just earlier in the week oil was at times above $130 a barrel.
Russia’s invasion of Ukraine pushed oil prices above $100 a barrel for the first time since 2014 as investors wagered on disruptions to resource exports from the region. The surge in energy costs has fueled worries about inflation, which was already at a four-decade peak in the US.
Traders are still worried about lower oil supplies as sanctions on Russia will be more likely longer term amid signs that the conflict will last longer. Talks between Moscow and Kyiv regarding a cease-fire failed to produce progress, Russian and US officials said Thursday.
“Sentiment is fragile still however, and the risk of further escalation still remains a very real concern in light of progress over the past two weeks,” said Michael Hewson, chief markets analyst at CMC Markets.
In economic data, US existing-home sales are down 7.2% in February, the National Association of Realtors said Friday, while February sales have dropped 2.4% from a year earlier. The average rate on a 30-year fixed mortgage recently passed 4% for the first time since 2019.
Investors are on the lookout for any emerging signs of weakness in the US economy, as the Fed begins to hike rates and households and businesses adjust to higher energy prices. Market-moving data points or developments that shift the focus here could generate major moves in the market.
“We can maintain that the recession risk this year is still very low, but we are likely to remain in provide an environment of a lot of volatility,” said Steven Violin, portfolio manager at the F.L.Putnam Investment Management.
At the individual stock level, FedEx declined $9.07, or 4%, to $218.91 Friday after reporting lower shipping volume and saying profit margins were being squeezed.
The yield on the benchmark 10-year US Treasury note dropped to 2.146% Friday from 2.192% Thursday, though it was up for the week. Yields rise as prices fall.
