Asian Open: Ukraine agrees to talk with Russia

Friday US cash market close:

• The Dow Jones Industrial rose 834.95 points (0.28%) to close at 3.00
• The S&P 500 index rose 95.95 points (2.51%) to close at 34,058.75
• The Nasdaq 100 index rose 214.495 points (1.53%) to close at 14,189.16

Asian futures:

• Australia's ASX 200 futures are down 0 points (-1.1%), the cash market is currently estimated to open at 6,997.80
• Japan's Nikkei 225 futures are up 470 points (1.77%), the cash market is currently estimated to open at 26,946.50
• Hong Kong's Hang Seng futures are up 330 points (1.46%), the cash market is currently estimated to open at 23,097.18
• China's A50 Index futures are up 159 points (1.08%), the cash market is currently estimated to open at 14,870.55

Wall Street rallied on Friday as the US unveiled fresh sanctions on Russia. The S&P 500 rise 2.3% to a 4-day high, although remains below its 200-day eMA. Tech stocks only managed to recoup 1.5%. Yet appetite for risk remains in the hands of Putin amidst conflicting headlines of peace talks with the Ukraine whilst sitting with is finger over the nuclear button.

Expectations of Ukraine-Russia talks are low

The Ukrainian President has confirmed that negotiations with Moscow will take place at the Belarusian-Ukrainian border, although he has stated that he does “not really believe in the outcome in the meeting, but let them try, so that later not a single citizen of Ukraine has any doubt that I, as president, tried to stop the war”.

Russia’s nuclear team is on high alert

As (unconvincingly) promising as that may sound, Putin has ordered his nuclear teams to be on high alert, in response to “aggressive statements” from NATO allies and widespread sanctions. Previously Putin had made a thinly veiled threats that he would ‘go nuclear’ if the West interfered – which as presumed to mean of putting boots on the ground to help Ukraine. The West’s supply of medical aid, food and weapons to Ukraine has likely irked Putin, whilst hard-hitting sanctions, the banning of transactions with Russia’s central bank and the removal of several Russian banks from the SWIFT payments system has since seen Putin up the ante. And the fact that his quick takeover of Ukraine has clearly not gone as planned rubs salt into the wound.

BP exit Rosneft

BP are walking away from their 20% stake in Russia’s oil firm Rosneft in response to Russia’s invasion of Ukraine. Chief executive Bernard Looney has resigned from the board with immediate effect and BP’s chair, Helge Lund, is expected to follow suit and described Russia’s actions as “an act of aggression”.

ASX 200:

Compared to Thursday’s white-knuckle ride, volatility was a bit of a damp squid for the ASX 200 on Friday. And perhaps that’s a good thing as Friday’s strong close on Wall Street stands a better chance of making a positive impact for Australian shares today.

Tech stocks are worth another look after enjoying their best day in over a decade on Friday. And if appetite for risk remains elevated then perhaps last week’s best performers, the utilities and consumer staples sector, could meet some headwinds today.

ASX 200: 6997.8 (0.10%), 27 February 2022

• Information Technology (8.14%) was the strongest sector and Financials (-0.99%) was the weakest
• 6 out of the 11 sectors closed higher
• 5 out of the 11 sectors outperformed the index
• 128 (64.00%) stocks advanced, 63 (31.50%) stocks declined

Outperformers:

• +12.41% - Paladin Energy Ltd (PDN.AX)
• +10.9% - APM Human Services International Ltd (APM.AX)
• +10% - Liontown Resources Ltd (LTR.AX)

Underperformers:

• -10.11% - Magellan Financial Group Ltd (MFG.AX)
• -5.57% - Northern Star Resources Ltd (NST.AX)
• -4.56% - Evolution Mining Ltd (EVN.AX)

AUD rallied into the weekend

The bounce on Wall Street served the commodity currencies well on Friday, with AUD rising nearly 1% and CAD up around 0.9% against the US dollar. It helped the Aussie to recoup the week’s earlier losses and was the strongest major last week, whilst GBP was the weakest. And that helped GBP/AUD fall to an 8-week low, and trades around 1% above our 1.8351 target projected from the head and shoulders top pattern.

Gold and oil move in lockstep

The bounce on Wall Street served the commodity currencies well on Friday, with AUD rising nearly 1% and CAD up around 0.9% against the US dollar. It helped the Aussie to recoup the week’s earlier losses and was the strongest major last week, whilst GBP was the weakest. And that helped GBP/AUD fall to an 8-week low, and trades around 1% above our 1.8351 target projected from the head and shoulders top pattern. However, developments over the weekend has seen AUD gap lower today and money has flowed into the yen. The US dollar handed back some of Thursday’s safe-haven gains and sent the US dollar index back below 97.0.

We can see on the gold futures chart that it pulled back on Friday to the November high. It’s likely to be a pivotal level today and could be the difference between successfully buying a dip or confirming a deeper pullback. Given the large upper spike / bearish pinbar last Thursday it suggests it overextended itself to the upside last week, but another move to 1916 seems feasible given the current climate, but a first step for that is for bulls to defend the area around 1879.50.

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