Markets wrap: ASX tumbles as surging commodity prices ring inflation alarm bells

The war in Ukraine continues to push energy prices higher, but instead of benefiting local miners, attention has now turned to the possibility of stalled economic growth.

Australia’s mining and energy titans came crashing down on Tuesday as the seemingly limitless surge in energy prices sent inflation alarm bells ringing.

War in Ukraine – and the mounting sanctions against aggressor Russia – again directed sentiment on the local sharemarket, with enthusiasm for surging oil and metal prices giving way to fears of stalled economic growth.

BHP, Rio Tinto, Fortescue Metals and Woodside Petroleum were all heavy losers as the benchmark ASX 200 fell 58.3 points, or 0.83 per cent, to slump to a third straight decline and close at 6980.3.

People keep warm by fires outside the main rail terminal in Lviv, Ukraine. Ukrainians from the eastern and central parts of the country have increasingly fled to western cities, which have so far been considered safer, as Russian forces advance toward Kyiv from three sides. Picture: Dan Kitwood/Getty Images

Day 12 of the conflict in Eastern Europe sent oil to a new 12-year high of $US130 and – although easing back late in overnight trade – left many analysts and traders bracing for the ensuing inflation surge.

“Markets remain very much on edge across the entirety of asset classes,” wrote Commonwealth Bank’s Head of Fixed Income and FX Strategy, Martin Whetton.

“Commodity players have been busy for some time, but be they softs or hards, new highs across the sectors seem to be breached each day and this quickly feeds into the narrative of inflation expectations and rate hikes.”

The local equity market slide mirrored a sour session on Wall Street, where all three major indices fell significantly amid the rolling Ukrainian conflict. Picture: NCA Newswire / Gaye Gerard

The broader All Ordinaries dipped 68.3 points, or 0.93 per cent, on Tuesday to 7252.9.

The Aussie dollar also took a tumble, dropping from Monday’s peak of above 74 US cents to 72.89 US cents at the local close, a fall that would have been exacerbated were it not for solid consumer and business confidence data, City Index analyst Tony Sycamore said.

The local equity market slide mirrored a sour session on Wall Street, where all three major indices fell significantly amid the rolling Ukrainian conflict.

OANDA Asia-Pacific senior analyst Jeffrey Halley said fears over the surge in commodity prices torpedoing world growth – and profits – had severely hurt equity markets the world over after “two years of central bank largesse”, while IG Markets analyst Kyle Rodda said supply shortages would certainly lead to some sort of crisis in global markets.

Australia’s mining and energy sectors led losses on Tuesday, with iron ore giant BHP down 3.7 per cent to $48.53 and Rio Tinto 4.3 per cent lower at $120.51. Picture: NCA Newswire / Gaye Gerard

The nature and severity of which, Mr Rodda said, depended on how long the Ukrainian conflict lasted.

“If things do begin to de-escalate, there’ll certainly be a swift reversal in the ‘invasion trade’,” Mr Rodda said.

“There’s a big war premium in assets right now. And as such, the end of that would see oil plummet, gold reverse course, and the Euro and European equities recover.”

Australia’s mining and energy sectors led losses on Tuesday with iron ore giant BHP down 3.7 per cent to $48.53 and Rio Tinto 4.3 per cent lower at $120.51.

Fortescue Metals dropped 4.5 per cent to $18.66, Mineral Resources was 4.4 per cent lower at $45.91, while BlueScope Steel plummeted 8.8 per cent to $18.99.

Energy proved to be a significant weight, with Woodside Petroleum down 4.2 per cent to $32.98, Santos dropping 3.8 per cent to $7.86 and Beach Energy 4 per cent lower at $1.70.

Energy proved to be a significant weight, with Woodside Petroleum down 4.2 per cent to $32.98, Santos dropping 3.8 per cent to $7.86 and Beach Energy 4 per cent lower at $1.70. Picture: NCA Newswire / Gaye Gerard

There were heavy losses for Nickel Mines, Pilbara Minerals, Allkem, OZ Minerals and the coal miners, although gold prospectors added some lustre to the bourse.

Market uncertainty drove the yellow metal to near 18-month highs of $US2000 an ounce, handing Newcrest Mining a 1.1 per cent gain to $27.68.

Northern Star was up 1.2 per cent to $10.87, Evolution Mining jumped 0.7 per cent to $4.42, and St Barbara shares surged 12.7 per cent to $1.60.

There were gains on Tuesday for Australia’s consumer giants: Woolworths rising 3.4 per cent to $35.74, Coles up 1.9 per cent to $17.50, and Wesfarmers up 0.7 per cent to $48.40.

Healthcare giant CSL rose 2.8 per cent to $256.65 and Resmed was up 1.9 per cent to $33.70 to help limit losses.

Commonwealth Bank gained 1 per cent to $95.59 in the strongest session of the Big Four.

Originally published as Markets wrap: ASX tumbles as surging commodity prices ring inflation alarm bells