ASX 200 kick-starts week 0.25% higher, industrial stocks lead gains

Highlights

• ASX 200 closed up, gaining 17.90 points or 0.25% to 7,093.00.
• China’s decision to lock down major cities amid worries about Covid-19 resurgence could strain supply chains; Russia’s invasion of Ukraine continues to raise energy, food costs globally.
• Australian share market might remain volatile amidst rising recession risks and commodity price variations

Lately, investors have been concerned that the US central bank could cause a recession if it raises rates too high or too quickly. Now, they seem relatively reassured on the US interest rate outlook. Bets that the Federal Reserve will lift US interest rates at a measured pace might help global market performance after a wild week of trading last week.

There are other factors investors are keenly eying-China’s decision to lock down major cities amid worries about a Covid-19 resurgence could continue to strain supply chains and Russia’s invasion of Ukraine has already raised energy and food costs globally.

How did ASX 200 perform?

Today, a rebound in crude oil and iron ore prices helped local commodity stocks, with rate hikes still dominating investor sentiments. It has been a good start to the week for the Australian markets as the ASX 200 seems to be in bulls’ control with almost all sectors trading higher.

The ASX 200 closed up, gaining 17.90 points or 0.25% to 7,093.00. Over the last five days, the index has lost 0.39% and sits 4.95% above its 52-week low.

On the sectoral front, eight of 11 sectors ended higher. Industrials was the best performing sector, gaining +2.38% and +1.15% for the past five days.

Despite a rise in iron ore prices, mining companies have been holding back on supply side due to rising virus related restrictions and the worsening property crisis in China. Heavy rains in parts of China, the world’s largest iron ore importer, have also weighed down the construction demand. Additionally, the latest default on payments by realty players have spurred fears for the upcoming future. Just last week, Sunac China Holdings, the fourth largest developer, missed on its bond payment.

Who gained? Who lost?

The top performer today was Brambles Limited (ASX:BXB), up over 11%. It has affirmed talks about a potential bid by CVC Capital. Given Brambles’ recent performance improvement, the future potential identified in the transformation plan and the good progress made in implementing that plan, this could be a strategic move.

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Brambles was followed by Qube Holdings (ASX:QUB) and Pilbara Minerals (ASX:PLS). Other gainers of the day were Xero Limited (ASX:XRO) and Skycity Entertainment (ASX:SKC).

On the other side, in the red zone of the ASX 200, Imugene (ASX:IMU) was the biggest laggard, its stock down over 5%. Other stocks in this zone were Polynovo Limited (ASX:PNV), Zip Co (ASX:Z1P), Tyro Payments (ASX:TYR) and Magellan Financial Group (ASX:MFG).

Asian and global market

Kick-starting the week on a positive note, Asia stocks climbed today, and treasuries slipped amid a steadier mood in global markets after a bounce in Wall Street shares on Friday.

Japan’s Topix index rose 0.5%, South Korea’s Kospi index rose 0.2%, Hong Kong’s Hang Seng Index rose 0.6%. Retail sales and industrial growth data showing China’s economy shrank in April. China’s Shanghai Composite Index rose 0.1%.

On Friday, shares on Wall Street closed higher, ending a wild week of trading buoyed by bets that the Federal Reserve will lift US interest rates at a measured pace. The S&P 500 climbed 2.4%, the Nasdaq rose 3.8% and the Dow Jones Industrial Average rose 1.5%.

Looking ahead, sinusoidal trends are likely to continue. The Australian share market might remain volatile amidst rising recession risks and commodity price variations. Rising interest rates and elevated inflation levels may continue to keep driving investors’ sentiment over the coming days. To sail through the approaching volatility, it seems imperative for investors to avoid panic selling and remain patient and judicious. They can think long-term and maintain a strong temperament without letting fear or greed impact their investment decisions.