Wall Street falls, oil rises, ASX retreats
Staff writers
Updated ,first published
Australia’s stock market fell on Monday as conflict in the Middle East continued to cast a heavy shadow over global markets and oil prices rose again.
The S&P/ASX 200 was down 36.1 points, or 0.4 per cent, at 8581 in afternoon trade, with eight of 11 industrial sectors in positive territory. Energy companies rose as oil prices rose and mining stocks lost value.
The Central Bank will announce its interest rate decision on Tuesday; Money markets are pricing the probability of a rate hike and further tightening at three out of four.
Oil prices were steady after US attacks on Iran’s main export hub marked a new escalation in the war that has left global customers almost completely cut off from the region’s energy supplies. Brent was trading around $103 a barrel after gaining more than 40 percent in the past two weeks, while West Texas Intermediate was around $98. After the United States attacked military facilities on Kharg Island, which holds the majority of Iran’s oil shipments, the Islamic Republic launched retaliatory attacks against Israel and the Arab countries in the Persian Gulf. Local energy companies are on the rise; Woodside Energy gained 2.5 percent, Santos gained 1.8 percent and Ampol gained 0.6 percent.
Mining stocks were hit after China’s state-backed iron ore trader told steel mills that BHP was temporarily easing restrictions on one of its grades; Rio Tinto fell 1.7 percent, Fortescue fell 3.3 percent, while BHP lost 0.3 percent. Gold miners pulled back as the safe-haven price weakened; Northern Star fell 5.1 percent and Evolution Mining fell 2.8 percent.
ANZ Group gained 0.2 percent, Commonwealth Bank gained 0.6 percent, National Australia Bank gained 0.2 percent and Westpac gained 0.5 percent.
Technology stocks fell; WiseTech fell 1.2 percent, Xero fell 1.8 percent and Technology One fell 2 percent.
On Wall Street, the S&P 500 index fell 0.6 percent on Friday after rising as much as 0.9 percent in early trading. The benchmark index has fallen 3.1 percent so far this year. The Dow Jones finished down 0.3 percent and the Nasdaq composite finished down 0.9 percent. The indices finished the week with their third consecutive weekly loss.
“Everything is traded in crude oil at this point,” said Baird market strategist Michael Antonelli. “We’re basically in a holding pattern until we get hour by hour, day by day news about the conflict in the Middle East.”
Oil prices have been fluctuating since the beginning of the war. Iran’s actions effectively halted cargo traffic in the narrow Strait of Hormuz, through which one-fifth of the world’s oil usually travels. This causes oil producers to cut production because their crude has nowhere to go.
Independent research firm Rystad Energy said that in just over a week since the strait was closed, more than 12 million barrels of oil equivalent had been taken offline each day.
If the war continues to hinder the production and transportation of oil in the Persian Gulf, it could cause a rise in inflation that could harm the global economy.
The Fed’s rate cut could stimulate the economy and job market, but it also has the potential to worsen inflation. The US Federal Reserve is scheduled to hold its next interest rate policy meeting next week. But CME Group said Wall Street traders estimate the chance of a rate cut at less than 1 percent.
A new snapshot of consumer spending on Friday shows inflation rose in January, even before the Iran war caused oil and gas prices to soar.
The Ministry of Commerce said prices increased 2.8 percent in January compared to the previous year. However, excluding the volatile food and energy categories to which the Fed pays closer attention, core prices rose from 3 percent to 3.1 percent in the previous month, the highest level in nearly two years.
Despite this, the report stated that consumers increased their spending at a solid rate of 0.4 percent in January, and their incomes increased at the same pace.
The University of Michigan’s latest consumer sentiment indicator on Friday showed consumer sentiment falling slightly to its lowest level of the year, driven by increases in gasoline prices since the start of the war in Iran.
Wall Street also received an update on how U.S. economic growth fared in the October-December quarter. The economy, which was disrupted by a 43-day government shutdown in the north last fall, grew at a slow 0.7 percent annual rate, down from last month’s initial estimate.
AP via Reuters
The Market Summary newsletter is a summary of the day’s transactions. Let’s each take ittoday afternoon.
