ASX rises, Pendal jumps on $2.4b Perpetual bid, US yield curve inverts after strong jobs data
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Loading... - Mary Campbell
- 04 Apr 2022
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Australian shares have risen as heavyweight mining stocks have hit a record high and the gold sub-index has rallied, but gains have been capped by the escalating Ukraine crisis.
The ASX 200 closed up 0.3 per cent, up 19.9 points to 7,514, recouping losses from last Friday when it fell 0.1 per cent.
Ukraine on Sunday accused Russia of carrying out a "massacre" in the town of Bucha, and Western nations reacted to images of dead bodies with calls for new sanctions on Moscow, which kept a lid on investor mood.
Mining stocks climbed 1.2 per cent.
Iron ore futures in China closed at a near eight-month high on Friday as hopes for economic stimulus rose following a month of COVID-19-induced lockdowns.
Global miner BHP rose 0.1 per cent and peers Rio Tinto and Fortescue Metals Group added 0.3 per cent and 3 per cent respectively.
Mineral sands explorer Iluka Resources jumped as much as 6.1 per cent after its board approved a rare-earths refinery project and secured government funding for it.
Gold stocks climbed 2 per cent and hit a near three-week high.
Newcrest Mining, Australia's largest listed gold miner, rose 0.9 per cent, while Northern Star also climbed 2.1 per cent.
Heavyweight banks were down, with the financial index dropping 0.3 per cent.
The mixed mood comes ahead of an interest-rate decision by the Reserve Bank of Australia on Tuesday.
NAB, ANZ and CBA lost 0.8 per cent, 0.2 per cent and 0.8 per cent respectively. Westpac also dropped 0.2 per cent despite a marginal rise in the afternoon trade.
Investment manager Pendal Group soared 18.1 per cent on receiving a buyout offer worth about $2.4 billion from asset manager Perpetual.
Perpetual's shares were down 6.6 per cent to $31.97.
Among the worst performers were Imugene (-4pc), Fletcher Building (-3.3pc) and Bank of Queensland (-3.2pc).
The Australian dollar was up at 75.10 US cents by 4:39pm AEST.
US Treasury yield curve inverts
US government bond yields resumed their upward climb on Friday as a key part of the US Treasury yield curve inverted once more on signs of persistent inflation.
Data released on Friday showed US employers added 431,000 jobs in March and the unemployment rate fell to 3.6 per cent, continuing a strong run of hiring that has left key aspects of the American labour market "little different" from where it was before the COVID-19 pandemic.
With US economic growth so robust — and inflation running at three times the Federal Reserve's 2 per cent target — investors are widely expecting a drum roll of interest rate rises this year.
Treasury yields — which retreated earlier last week as portfolio adjustments boosted demand for bonds — spiked again on Friday, causing a closely watched part of the yield curve to invert for the third time in the past week.
An inversion of the yield curve — when shorter-dated yields rise above longer-dated ones — is seen as a harbinger of a recession in the next one or two years.
"[Friday's] solid growth of payrolls checked the box for the Fed in its drive toward fighting inflation," said Rick Rieder, BlackRock's chief investment officer of global fixed income.
"Consequently, the Fed looks clearly undeterred in reaching at least policy neutrality and probably will do at least one, and maybe two, 50-basis-point rate hikes by the June … meeting, which could even include an inter-meeting hike."
Bets that aggressive monetary tightening could be in the cards did not drag equity markets lower on Friday.
Euro zone inflation 7.5 per cent in March
US stocks finished higher after a choppy session on Friday.
The Dow Jones Industrial Average rose 0.4 per cent, the S&P 500 added 0.34 per cent, and the Nasdaq Composite gained 0.29 per cent.
The pan-European STOXX 600 index climbed 0.54 per cent and MSCI's gauge of stocks across the globe rose 0.16 per cent.
Inflation in Europe is also running at record levels, with euro zone inflation hitting 7.5 per cent in March, data showed on Friday, another all-time high with months left before it is set to peak, raising pressure on the European Central Bank to act to contain prices even as growth slows sharply.
In response, the German 10-year government bond yield, a benchmark for the euro zone, rose 2.8 bps to 0.58 per cent, after jumping 39 bps in March, its biggest monthly rise since 2009.
"Government bond yields have moved up markedly in recent weeks, and can be expected to trend higher over time, due to inflationary pressures that are here to stay and responses by the main central banks," Christian Nolting, global chief investment officer at Deutsche Bank Private Bank said in a note.
Two-year US Treasury yields jumped to 2.4503 per cent from 2.284 per cent, surpassing benchmark 10-year US Treasury yields, which also rose to 2.3767 per cent from 2.325 per cent.
"Given its impressive track record in predicting US recessions — it's been almost 50 years since the last false positive — it would seem foolish to doubt that bearish recession speculation," said Paul Ashworth, chief North America economist at Capital Economics.
"Historically, however, the 10-year three-month [Treasury yield] spread has done a better job of signalling downturns than the 10-year two-year spread and the former is still close to 200 basis points," Ashworth added.
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