Global markets were mixed on Friday, as US Markets (S&P 500 Index -1.3%) digested hot inflation numbers and draw their attention to upcoming US Fed decision this week, with markets expecting a 0.25% interest rate hike.
This comes despite optimism rising from the Russia and Ukraine conflict, after Russian President Vladimir Putin said Friday “certain positive shifts” have occurred in the talks between the Kremlin and Ukraine. Meanwhile, President Volodymyr Zelenskyy reportedly said Ukraine has reached a “strategic turning point” in its war with Russia.
European Markets closed higher (Stoxx 600, +1%) on Friday, as some supportive growth data came through as Britain’s GDP rose +0.8% month on month in January – following a -0.2% fall in December. The Bank of England also makes an interest rate announcement this week.
Rio Tinto (RIO:ASX)
Rio Tinto shares have managed to hold up amidst the current market volatility. With sanctions imposed on Russia, the global supply of commodities is under threat and higher pricing is benefiting Rio Tinto as iron ore and its other commodity prices jump higher.
Rio Tinto also announced a record result, helped by strong commodity prices last year which were up ~50% over the previous year with the firm paying a record $16.1billion in dividends for the 2021 financial year.
We are BUY rate don Rio due to its attractive dividend 7-9%, with a view that commodity prices are also likely to remain supported with sanctions on Russia limited global supply, as well as the high inflation environment which acts more favourably for commodity stocks. However, due to elevated commodity prices and recent volatility, we add a high-risk caveat to our rating.
Iron Ore – 3-Year Price Chart
Australia & New Zealand Market Movers
The Australian market was down on Friday (ASX200 index, -0.9%) as most sectors were down Ukraine-Russia conflict and inflation concerns mount on market sentiment.
Utilities, Energy and materials were in the only sectors in the green, while tech continues to lead losses, followed by consumer discretionary.
The New Zealand market was down on Friday (NZX 50 index, -0.9%) as four-year high inflation data from the US weighed down on the market.
Eroad (-3.9%), Heartland (3.7%) and Pacific Edge (-3.2%) were hardest hit on the day.
Tourism Holdings fell -2.8% after the commerce commission made statement highlighting concerns about the planned acquisition of Apollo Tourism.
3 Things Markets will be Watching this Week
- Geopolitical risks remain extremely elevated with the Russia/Ukraine conflict.
- Highlights this week include the US Fed interest rate meeting, Bank of England and Bank of Japan rate calls, inflation data from the Eurozone, and Chinese retail sales, industrial production, and fixed assets investment.
- Locally, NZ fourth quarter GDP results, and Australia’s employment data.