The market rose again after three days of rallying this week, but was unable to fully halt the slide in the face of global inflation and a host of other local and geopolitical pressures.
The All Ordinaries hovered between a low of 7,326 points on Monday and a high of 7,426 points on Wednesday, slipping to 7,303 yesterday before making modest gains to 7,380 points today.
The ASX300 – or Small Ordinaries – followed a similar trajectory, falling to 3,011 points yesterday before rising to 3,047 today.
Rising prices and slowing economies have also spread hesitation in other markets, with the FTSE 100 index tumbling 1.8% on Thursday, while US stocks saw the biggest single-day drop on Wednesday. since the start of the pandemic in 2020.
The bear will not hibernate
Sharply rising inflation, a gloomy outlook for retail trade and rising interest rates all contributed to the gloomy market outlook, leading many analysts to believe the bear will not hibernate. anytime soon.
“A red wall of worry has been building up in financial markets as investors grow increasingly worried that economies are heading into recession,” said Susannah Streeter, senior investment and market analyst. at Hargreaves Lansdown.
Bank of England and US farmers warn of impending food crisis
Bank of England Governor Andrew Bailey has added another sobering piece to the painful puzzle, warning that he has “run out of jumpers” to counter runaway energy and food costs driven by geopolitical factors independent of his will.
The governor said he spoke to Ukraine’s finance minister and added: “The [risk] I’m going to sound rather apocalyptic about I guess it’s food.
“Ukraine has food in store, but they cannot deliver it at the moment. While [the finance minister] was optimistic about planting crops, he said that at the moment we have no way to ship it as it stands and the situation is getting worse.
“It’s a major concern. It’s not just a major concern for this country, it’s a major concern for the developing world.
“I’m by no means a military strategist, but anything that can be done to help Ukraine get its food in would be a huge contribution.”
The Russian invasion of Ukraine has weighed on already precarious international food security, driving up the prices of cooking oil, fertilizers, cereals – wheat being particularly affected – and fuel at a time when the Report Global Food Crises Report 2022 describes global hunger levels as “alarming”.
The report says an additional 40 million people in 53 countries and territories are acutely food insecure and in need of emergency assistance, a 26% increase from 2020 levels.
The crisis could start affecting supermarket stocks within months, according to US farmer John Boyd Jr, president of the National Black Farmers Association, who spoke with Leland Vittert on NewsNation’s “On Balance.”
Poor weather conditions for planting, higher prices for seeds, fertilizers and fuel, coupled with persistent weaknesses in the supply chain, are undermining farmers’ efforts to feed their country.
“We’re going to see a lot of empty shelves and much higher prices,” Boyd Jr. said.
Australia is by no means immune to these pressures and may even be particularly vulnerable.
“We’ve been talking about these scenarios for 50 years,” said Dr Ro McFarlane, an ecological public health expert from the University of Canberra.
“We speculated. We measured. We applied our mind to the creation of predictive models. But for various reasons, we were not taken particularly seriously.
Weaknesses in Australia’s supply chain have been highlighted in recent years, first by the COVID-19 pandemic, then by widespread and continued flooding in eastern states, and now by a second shortage supply chain exacerbated by the Ukrainian conflict.
“We’ve centralized, commodified, and simplified all the food we eat,” Dr. McFarlane explained.
“This has made it incredibly vulnerable to the extreme weather conditions currently occurring in Canada, the United States and Australia. The ability to absorb a conflict like the one between Russia and Ukraine simply does not exist.
Those on the safe side might consider stocking up on some essential items before potential shortages hit the shelves.
Finland and Sweden formally apply for NATO membership
Much to Russia’s fury, its invasion of Ukraine has galvanized neighboring countries, undermining the sense of security in the region and pushing previously reluctant nations into the arms of the NATO alliance.
Sweden and Finland have officially applied to join NATO.
Finland’s candidacy is particularly noteworthy, because until very recently Finland maintained unwavering military neutrality, a consequence of the Winter War of 1939 (and the Continuation War) which claimed more than two million Russian victims and 9% of Finnish territory ceded to Russia.
It also risks directly provoking Russia, as Finland shares a 1,335 kilometer border with the larger nation.
Russia’s aggression in Ukraine – which followed a turn in public opinion against Russian relations – is telling, proof that the Eastern European powerhouse is uncomfortable with the specter of NATO at its doorstep.
The Netherlands, one of the founding members of NATO, offered Sweden and Finland military protection ahead of the NATO decision, with Defense Minister Kajsa Ollongren saying that “the security guarantee European Union applies anyway” and that the Netherlands can “certainly make a contribution”. to the safety of the Swedes and the Finns pending the verdict of NATO.
Stablecoins Reveal Volatility as Crypto Market Falls
Stablecoins are a type of crypto designed to be tied directly to another security, maintaining a stable valuation. The coin is pegged to another asset, often a fiat currency like the US dollar, and should hold that value despite the market.
Unfortunately, not all stablecoins are created equal, as the market found out when TerraUSD crashed and burned, losing 99.9% of its value since May 6.
Marketed as a stablecoin, TerraUSD (or LUNA) was actually an “algorithmic stablecoin” based solely on computer code with no real collateral to back the cryptocurrency.
“It was inevitable that Terra would collapse as reliance on using other cryptocurrencies as collateral along with LUNA’s mint/burn mechanism for Terra were not enough to survive any serious market volatility” , said the CEO of Crypto wallet company PinkPanda, Adam Carlton.
Naturally, other stablecoins are now under the microscope, with Tether in particular being looked down upon. Skeptics claim that the organization does not hold the required $82 billion collateral, although stablecoins are apparently based on genuine collateral.
Despite all this, the Tether (USDT) coin briefly dipped to US$0.97 before regaining its equivalent value to the US dollar.
While some stablecoins are unlikely to survive this latest crypto market crash, some analysts believe they will only grow in value from here, becoming a staple of the crypto industry.
“The market is clearly showing us that secured stablecoins are the future,” said Andrew Pesco, head of investment management at Domain Money.
PinkPanda’s Adam Carlton echoed this sentiment, saying, “Despite all the harm caused by the Terra Foundation’s reckless approach to stablecoins, we will see the industry step up and create even more resilience in the markets.”
Small caps win this week
The market hasn’t been particularly forgiving this week, dishing out gains here and there without regaining much lost ground.
Some small caps shone in the gloom, their gains all the more impressive in a bear market:
Havilah Resources Ltd (ASX:HAV) soared 84% on Tuesday after initiating a proposed transaction with prominent copper producer OZ Minerals Limited. The transaction includes a strategic alliance and an option to purchase the Kalkaroo Copper-Gold Project, which contains 1.1 million tonnes of copper, 3.1 million ounces of gold and 23,200 tonnes of cobalt.
Discovery Alaska Ltd (ASX:DAF) also saw a sharp rise in share price, up 61% over three days after identifying widespread lithium mineralization through historical drill core data at the Coal prospect. Creek from the Chulitna project.
The company is already working on a first JORC resource for the project, believing the historical data will “quickly accelerate exploration work”.
Auric Mining Ltd (ASX:AWJ) received a slightly late windfall today, climbing 23.68% after moving yesterday to acquire a more privileged country in the Widgiemooltha/Norseman region of WA, with the possibility of lithium and nickel on the retainer offering a ‘mouth-watering possibility’.
The area is largely unexplored greenstone, but soil sampling has indicated potential for nickel, with the added bonus of pegmatites which may hold promise for rare earths and lithium.