ASX 200 News Today: Energy Supply Fears and Mining Weakness Drag Australian Stocks Lower

The S&P/ASX 200 finished lower on Friday as investors responded to increasing geopolitical tensions and weakness in key resource sectors. The index weakened 1.00% at the close in Sydney on Friday. This weakness was due to the losses in the metals, mining and materials sectors. Investors also watched energy markets closely as fears of potential fuel shortages were raised by tension in the Middle East.

Energy Supply Risks Raise Concerns for the Australian Economy

Australia is increasingly threatened by ongoing global oil supply disruptions. According to Energy Minister Chris Bowen, Australia currently holds fuel reserves equivalent to 36 days of petrol, 34 days of diesel, and 32 days of jet fuel.

This is the highest level in over a decade but still far below the recommendation of the International Energy Agency of 90 days. On the other hand, Japan maintains much larger emergency oil reserves which can cover roughly 254 days of consumption.

A prolonged disruption in the Strait of Hormuz could therefore create serious challenges for Australia. Diesel is essential for long haul transport, agriculture and mining operations. Iron ore mines in Pilbara region alone use hundreds of millions of litres of diesel every year.

Higher prices of diesel may raise cost of mining and transport and drive up the price of food. Rising jet fuel prices in Singapore have increased 140% since Feb 27 to a record $225.44 per barrel. They are also putting pressure on the aviation industry.

Sector Performance Shows Market Weakness

The drop in the ASX 200 was mainly due to weakness in mining and gold companies. Sandfire Resources was down 8.78% to close at 17.24 AUD. Westgold Resources lost 8.17% to 6.63 AUD, while Northern Star Resources lost 7.87% to 27.05 AUD.

Some of the technology and defence stocks were able to make their way up during the session. Wisetech Global was the best performer on Friday with 10.83% gain to close at 52.72. On the other hand, DroneShield and Magellan Financial Group increased by 10% and 9.27%, respectively. Volatility in the market also rose with the S&P/ASX 200 VIX index up 6.15% to 14.97.

ASX 200 Technical Analysis: Key Support and Downside Risks

The daily chart for ASX200 shows that the index peaked above 9,080 and initiated a strong drop on Friday. The index closed below the 50-day SMA on Friday, but the immediate support remains the 200-day SMA at 8,770.

A break below 8,770 will trigger another drop towards 8,700, which is strong support for the index. As long as the index remains above 8,400, the trend remains bullish. A break above 9,080 is required to complete the correction and continue higher.

The short-term chart for ASX200 also shows support at the current level, which is seen by the 50-day SMA on the daily chart. A break below 8,800 will likely trigger another drop towards 8,700.

The strong drop in the ASX200 is led by the strong drop in the Materials Index. If the Materials Index further drops towards the 21,500 level, it will likely trigger a strong buying opportunity in ASX200.

Bottom Line

Overall, the ASX 200 is sensitive to global energy risks and weakness in the mining sector. Rising geopolitical tensions and threat of shortage in fuel could keep investors cautious in the short-term. Higher prices of diesel and energy may also lead to higher prices for transport, mining and agriculture which can impact the overall economy.

However, strong gains in technology and defence stocks demonstrate that investors are still willing to purchase growth sectors in market dips. Therefore, the growth of these stocks is watched closely on Monday.

If key support levels at 8,700 and 8,400 hold, the index may stabilise and attract buyers. But further weakness in materials sector could keep markets under pressure in the near term.