Global markets were higher overnight, with US markets recovering (S&P 500 Index, +1.9%) despite a continued surge in oil prices amid the intensifying conflict between Russia and Ukraine.
Calming nerves would have been a combination of the Kremlin which said its delegation was ready to hold a second round of talks with Ukraine tonight. More importantly for markets, Federal Reserve Chair Powell cited inflation concerns and signalled he is in favour of raising interest rates this month as previously planned – but said the central bank would proceed carefully given the Ukraine crisis. Powell endorsed a 0.25% rate hike this month and kept the option of a 0.50% move on the table for the future if inflation was higher or more persistent than expected. The market is getting more concerned with inflation getting out of control and welcomed more certainty regarding upcoming rate hikes.
This result saw all sectors trading in the green, with financials leading gains on news of rate hikes weren’t being delayed, followed by Energy and Materials benefiting from rising commodity prices.
European Markets ended a choppy session higher (Stoxx 600 +1.1%) recovering from a loss at the open, with oil and gas stocks leading gains.
Infratil (IFT:NZX / IFT:ASX)
Infratil announced it will conduct a strategic review of tis 50% shareholding in Retire Australia – which could include a full on sale. This move continues Infratil’s recent shift from a listed infrastructure fund to a more of a listed private equity type vehicle.
We are BUY rated on Infratil as our preferred infrastructure play, with exposure into data, renewable energy and healthcare infrastructure as all positive catalyst for medium to long-term growth.
Australia & New Zealand Market Movers
The Australian market was higher yesterday (ASX200 index +0.3%).
It was mixed day for the market with heavy gains for Energy and Material stocks more than offsetting losses across the broader market as commodity prices rise, particularly oil which jumped another +4.8% to $110 per barrel – and is now up +40% from the start of the year.
Woodside Petroleum Australia’s largest listed oil and gas company rose +6.1% to new post pandemic highs. The current high inflationary environment saw iron ore prices lift as well benefiting the three largest iron ore miners on the ASX being BHP(+3.8%), Rio Tinto (+4.6%), and Fortescue Metals (+4.7%).
The New Zealand market was down on Wednesday (NZX 50 index -0.9%) ending its 3-day rally as investors reacted to uncertainty of Russia-Ukraine conflict and inflationary implications.
Losses were broad-based as investors flocked to bonds, Ryman healthcare being a heavy loser again down -4.8%. Fonterra fell -4% after the global dairy trade auction overnight fetched yet another record price, with the Ukraine crisis putting pressure on an already short supply of milk (good for farmers, not for shareholders).
Tourism Holdings rose +0.4%, despite the Commerce Commission needing more time to consider the Apollo Tourism and Leisure acquisitions.
3 Things Markets will be Watching this Week
- Geopolitical Risks – Russia/Ukraine.
- Eurozone inflation figures and the latest manufacturing data in China.
- Locally, the RBA meeting will be a big focus along with Q4 GDP data in Australia.