Markets plunge as bloodletting continues and Australia gets its first ‘future of food’ ETF
The battering of tech stocks continues unabated as markets continue to fall.
Last night the S&P 500 finished below 4,000, falling 3.2% for the first time in more than 12 months.
The Dow Jones Industrial Average fell approximately 653 points, or 2%, to end near 32,245, while the Nasdaq Composite Index finished down 4.3%.
It was not only tech stocks giving investors headaches, but the energy sector also fell 8.3%, recording its worst one-day decline since June 11, 2020.
Investors are on edge as the Federal Reserve gets set for several sharp interest rate rises over the next few months to help cool inflation at 40-year highs, but while also looking to avoid sending the economy into a recession.
The FTSE is also copping a hiding. The FTSE All-World barometer of global stocks dropped 3%, which is also its largest decline since June 2020. Investors are concerned about rising interest rates and an economic slowdown in China amid climbing COVID-19 cases.
All of this sets the tone for another ASX fall, with ASX SPI 200 futures trading down 1.4% to 7003 – a nine-week low.
Expect margin calls to magnify today’s expected decline.
“The bloodletting on stock markets has continued… with the biggest declines being seen in basic resources after the latest China trade data showed that imports ground to a halt in April,” CMC Markets UK market analyst Michael Hewson said.
Here’s what we saw: (source Commsec):
- The Euro rose from near US $ 1.0495 to US $ 1.0590 and was near US $ 1.0560 at the US close.
- The Aussie dollar fell from near US70.25 cents to US69.48 cents and was near lows at the US close.
- Global oil prices slumped due to slower demand from the world’s top importer, China, on continued COVID lockdowns in the country. Uncertainty also abounds on whether the proposed European Commission embargo on Russian oil will proceed. The proposal needs a unanimous vote by EU members this week to pass. Saudi Arabia, the world’s top oil exporter, also lowered crude prices for Asia and Europe for June. “Oil is offside too as China confirmed its oil imports in the first four months of the year fell by 4.8%,” Equiti Capital’s David Madden said.
- The Brent crude price fell by US $ 6.45 or 5.7% to US $ 105.94 a barrel.
- US Nymex crude fell by US $ 6.68 or 6.1% to US $ 103.09 a barrel.
- Base metal prices fell on Monday by between 1.8-6.3% with copper down the least and nickel down the most.
- The gold futures price fell by US $ 24.20 or 1.3% to US $ 1,858.60 an ounce.
- Spot gold was trading near US $ 1,853 an ounce at the US close.
- The iron ore futures price fell by US $ 6.45 or 4.7% to US $ 131.99 a tonne.
Future of Food fund
Australian fund manager BetaShares is launching the BetaShares Future of Food ETF (IEAT) as food scarcity and manufacturing begins to take center stage in investors’ thinking.
The Australian-first ETF comes as technological innovation revolutionizes the way food is produced and distributed across the globe.
This thematic is underpinned by several powerful megatrends, such as an increasing global population, improving living standards, more awareness about the impact of livestock on greenhouse gas emissions and animal welfare considerations. As a result, many people are replacing animal-based foods with plant-based alternatives or seeking out foods that are produced and distributed via more sustainable means.
The BetaShares Future of Food ETF (IEAT) will provide exposure to a portfolio of companies at the forefront of changing the way food is produced, distributed, and consumed. To qualify for inclusion, companies must be engaged in activities around food production, food chain improvement or food supply. IEAT’s index constituents currently include global leaders in the food production sector, including:
- Beyond Meat, a well-known producer of plant-based meat substitutes for burgers, sausages and other beef products.
- Tattooed Chef, a leading producer of plant-based ready-to-cook frozen meals.
- Danone (OTCQX: DANOY), a global food products company with an increasing presence in the plant-based dairy market.
Subject to regulatory approvals, IEAT is expected to start trading on the ASX at the end of May 2022.
In what may be a positive sign for inflationary pressures, the CommBank Household Spending Intentions Index fell 3.8% to 112.3 in April, showing that household spending dropped from a record high in April, due to slumps in home buying, health & fitness and transport spending .
Despite this, spending in retail, travel and entertainment all increased as borders opened and people began to let their hair down.
Home buying spending fell by 21.5% after gains in February and March, and is 13.1% lower than in April last year, while spending in the health & fitness sector dropped 14% and transport spending fell by 8.6% due, in large part, to the reduction in the petrol excise and lower fuel costs.
Travel spending reached a new record high in April to exceed the pre-COVID peak, climbing 10.6%. It is up 41% on April 2021.
Higher interest rates to contain inflation have put pressure on the US market since Thursday last week.
“Market participants are not yet comfortable with the idea of buying on the weakness,” said Briefing.com analyst Patrick O’Hare.
“There are misgivings about the achievability of earnings growth estimates and the resilience of the US consumer in the face of persistent inflation pressures and rising interest rates.”
As we know, tech stocks are leading declines. Yesterday, Apple Inc (NASDAQ: AAPL). came off 3.3%, Amazon.com Inc (NASDAQ: AMZN) fell 5.2% and Facebook parent Meta Platforms Inc (NASDAQ: FB) lost 3.8%. Tesla Inc (NASDAQ: TSLA) sank more than 9% to $ US787.11 and Microsoft Corporation (NASDAQ: MSFT) lost 3.7% to $ US264.58.
Semiconductor and software companies AMD and NVIDIA were down more than 9% to $ US86.36 and $ US169.50, respectively.
Tech isn’t alone though.
Outperforming petroleum-linked companies also had a bad day. ConocoPhillips (NYSE: COP) shed nearly 10% while Chevron Corporation (NYSE: CVX) took a 6.7% dive.
Other losers were Rivian Automotive plunging more than 20% on the back of Ford’s report that it will unload eight million shares of the electric truck maker.
On the bright side, Philip Morris International was 0.9% higher after confirming it was in talks to acquire Swedish Match in a deal that would boost its smokeless offerings.
Followed the same trend as every other market, Europe was down on fears of prolonged COVID-19 curbs in China.
Travel & leisure lost 6% with technology down 5% and miners falling 4.4%.
Rising bond yields were also an influence in driving technology shares lower.
The Sentix measure of moral investor in the eurozone fell to a two-year low in May.
The pan-European STOXX 600 index fell by 2.9% to two-month lows. The German Dax lost 2.2% and the UK FTSE fell by 2.3%. In London trade shares in Rio Tinto fell by 4.6% and shares in BHP fell by 4.4%.