Home / ASX (ASX:XJO) sinks on growing recession risk, energy shares tumble, Endeavour looks deeper

The local sharemarket followed a weak global lead with both the All Ordinaries (ASX:XAO) and S&P/ASX200 (ASX:XJO) dropped 1.3 per cent on Friday, following a 1.6 per cent fall the day prior. Oil and energy prices remain the biggest influence, with the once popular sector falling 4 per cent on Friday and 4.9 per cent for the week on growing monetary policy induced recession risk around the world, a message reiterated by AMP’s Shane Oliver. Woodside (ASX:WDS) and Santos (ASX:STO) both fell by more than 4 per cent as global oil prices plunged. Shares in Endeavour (ASX:EDV) were a rare highlight, amount just 17 of the top 200 companies that managed to eke out a gain on Friday. The owner of Dan Murphy’s suggested that it was in a strong position to capitalise on weakness in the wine industry by buying up distressed wineries in the coming year. Another rare highlight was APA (ASX:APA) with the pipeline owner managing a 0.2 per cent gain after announcing a 3.8 per cent increase in its dividend. The local market fell 2.1 per cent across the week with Lake Resources (ASX:LKE) the biggest detractor, falling 38 per cent.

Nasdaq snaps winning streak, Starbuck’s under pressure, rate hikes ahead

All three US benchmarks sold off on Friday following more news on monetary policy. The tech-focused Nasdaq fell by 1 per cent, halting an eight week win streak, with the benchmark down 1.4 per cent for the five days as well. It was a similar story for the S&P500 and Dow Jones, which fell 0.8 and 0.7 per cent, but also dragged 1.4 and 1.7 per lower across the week, as rate hikes, falling energy prices and growing recession risks hit sentiment. The latest speech from the Federal Reserve did little to allay fears of further rate hikes, with Jerome Powell suggesting the current pause could be replaced with a ‘couple’ more hikes during the rest of the year. At the same time signs that the economy is slowing continue, with European PMIs showing weakness and the US services PMI also contracting. In company specific news, Starbucks (NYSE:SBUX) is facing growing union pressure with shares falling more than 2 per cent on news of strikes in the US that could hit 150 stores.

Recession risks grow, dollar sinks, UK inflation stickier than expected

The mixed messages from markets continue with the technology and high quality growth sector driving the US sharemarket into a bull market, but growing recession risks elsewhere. In fact AMP Capital’s Shane Oliver this week now expects the Australian economy to see a recession within 12 months, not unlike what is occurring in New Zealand, as rate hikes finally flow through. This comes amid a worsening story in the UK, which saw higher than expected inflation trigger a resumption of rate hikes, something followed by both Turkey, Norway and Switzerland. Australia remains at the brunt of global policy with the AUD suffering its worst week in 3 months, falling on the growing rate differential with the rest of the world, a likely secondary consideration for the central bank.