Wall Street slumps, oil hits $US100, ASX back in green by lunchtime
Staff writers
Updated ,first published
The Australian share market erased early losses and returned to the green at midday on Friday after another volatile night on global markets with oil prices reaching US$100 a barrel.
The S&P/ASX 200 index was up 22.9 points, or 0.3 per cent, at 8651.9 by 12:40 AEDT, clawing back some of Thursday’s 1.3 per cent loss. Seven of 11 industrial sectors rose, led by financial and energy stocks.
The action again focused on the oil market, where the price of a barrel of Brent crude oil, the international standard, rose 9.2 percent to settle at $100.46. Worries are worsening that the war could block oil production in the Persian Gulf for a long time and cause a debilitating surge of inflation in the global economy. The barrel of benchmark US crude oil increased by 9.7 percent to $95.73.
Energy shares strengthened on the ASX, driven by rising oil prices; Santos rose 1.7 percent, Woodside Energy rose 1.3 percent and Ampol rose 1.8 percent. Energy Minister Chris Bowen has signaled plans to release an extra 800 million liters of petrol and diesel from domestic reserves.
Iron ore giants Rio Tinto (up 3.4%) and Fortescue (up 6%) rose as iron ore prices rose on supply concerns, but BHP fell 1.2% after China’s state-run steel iron ore buyer extended a ban on one of the miner’s products. Gold miner Northern Star fell 16.4 percent after warning that reaching the bottom end of its production forecast would be “challenging” due to weak performance in the last two months. Fellow gold player Evolution Mining lost 0.3 percent in early trading.
Financial shares rose, with the big four banks also rising: Commonwealth Bank and National Australia Bank rose 1.8 per cent, while Westpac gained 1.7 per cent and ANZ Group added 1.7 per cent. The Central Bank will meet on Tuesday and money markets have priced the possibility of an interest rate hike as over 70 percent.
Qantas fell 0.1 per cent after it said it would pay $105 million to settle a class-action lawsuit over flights canceled during COVID. Virgin Australia gained 0.4 percent.
Technology stocks continued their volatile week with a mixed trend. WiseTech fell 1.8 percent, while Zero rose 1.9 percent and Technology One rose 0.9 percent.
The Australian dollar was trading at 70.80¢ at 12.52am AEDT.
On Wall Street, the S&P 500 fell 1.5 percent, continuing sharp swings after several days of relative calm. The Dow Jones fell 739 points, or 1.6 percent, and the Nasdaq composite lost 1.8 percent.
Iran’s new supreme leader made his first statement since succeeding his late father on Thursday, saying his country would continue its attacks on its Arab neighbors in the Gulf and use the effective closure of the Strait of Hormuz as leverage against the United States and Israel. One fifth of the world’s oil passes through the strait, and oil producers in the region are cutting production because crude oil has nowhere to go.
Countries around the world are trying to compensate, and the International Energy Agency said Wednesday that its members will release a record 400 million barrels of oil from stockpiles created for such emergencies.
However, such moves are short-term fixes and do not eliminate long-term risks. Analysts say that if the Strait of Hormuz remains closed, oil prices may rise to $150.
Of course, the U.S. stock market has a history of rebounding relatively quickly from military conflicts in the Middle East and elsewhere, as long as oil prices don’t stay too high for too long. Even with all the up and down swings over the past few weeks, with markets swinging for hours, the S&P 500 remains just 4.4 percent below its all-time high in January.
What makes this jump in oil prices frightening is not only the extent to which prices have reached almost $120 per barrel, the highest level since 2022, but also the fact that they are happening at an uncertain time for the economy.
Hiring by U.S. employers last month was surprisingly weak; This has raised concerns about the worst possible scenario for the economy, called “stagflation”. This is where economic growth stagnates while inflation remains high, and it’s a terrible mix that the Federal Reserve doesn’t have a good tool to fix.
A more encouraging signal came on Thursday. The number of U.S. workers applying for unemployment benefits decreased slightly last week, a report said. That’s a sign that layoffs across the country remain potentially low.
Some of Wall Street’s worst losses have again hit companies with huge fuel bills. Cruise ship operator Carnival fell 7.9 percent and United Airlines fell 4.6 percent.
Concerns about the private credit sector also continued to hurt the market. Investors are withdrawing money from some funds and companies that make loans to businesses whose profits are threatened. Much of the concern focuses on businesses that are unable to repay their loans due to competition from AI-powered rivals.
Morgan Stanley fell 4.1 percent after the North Haven Special Income Fund said it was allowing investors to buy back 5 percent of total shares instead of the nearly 11 percent they had requested. This 5 percent limit is the advertised limit.
European stock markets retreated, with the Euro Stoxx 50 losing 0.8 percent.
AAP with AP
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