Despite being a public holiday in Australia, US equity markets were open for trading on Easter Monday.
It was a somewhat of a choppy trading session, with the S&P500 swinging between gains and loses several times, before closing marginally lower, after a rally into the close. By the end of the session, the S&P500 finished 0.90 points lower (-0.02%) at 4,391.69, while the Nasdaq100 was +0.13% higher at 13,910.77. From the S&P500, the energy sector was the standout performer, gaining 1.51%, buoyed by stronger crude oil and natural gas prices, while financials were also stronger, up 0.61%. European equity markets were closed for Easter Monday, and while the ASX SPI200 futures have not traded since last Thursday, we would expect Aussie equities to open a little firmer once trading begins this morning.
Stronger commodity prices, particularly across the energy complex, continue to support a higher inflationary environment. On Monday, WTI crude oil closed 1.18% higher at US$108.21, while natural gas prices surged to their highest levels in over 13 years, closing at US$7.82 MMBtu. Spot gold prices retreated from session highs to close flat at US$1,977.99 an oz, while base metals prices were firmer. Bond yields continue to move higher, with the yield on the US 10 year note now 2.85%, as the market continues to assess how aggressive the US Federal Reserve will be with their rate hike cycle. The current consensus is that the Fed Funds rate will be lifted by 50 basis points in May.
Adding additional pressures to inflation expectations is the ongoing Russian invasion of Ukraine, and the retaliatory sanctions on the Russia economy, which is leading to further supply disruptions of key commodities, such as oil, gas, wheat, and fertilisers. Downstream effects of this are likely going to be higher food prices, particularly for grains, which will eventually flow through to meats as well. This will likely impact poorer countries first, whose populations spend a larger percentage of annual income on food. Furthermore, China is continuing to pursue a ‘Zero Covid’ policy, enacting lockdowns across major cities to curb infections.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
In Aussie stock news, Hub24 (HUB) have released their 3rd quarter results this morning, showing net inflows of assets under management (AUM) of $2.6 billion, which is a gain of 36.4% on the prior corresponding period, taking their total AUM to $68.3 billion. Meanwhile, Syrah Resources (SYR) has been awarded a US$107 million loan from the Bidon Administration to help finance a U.S plant expansion. Syrah are a graphite company, looking to produce graphite-based active anode material for the electric vehicle battery market, with a four-year offtake agreement with Telsa (TSLA) already in place.
The Australian dollar (AUD/USD) dipped slightly overnight, currently trading at 73.48 US cents, while the yield on the Australian 10 year government bond is at 2.97%.
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
