Wall Street seesaws, oil mixed, ASX set to steady
Staff writers
Updated ,first published
Australia’s stock market fell in early trading on Tuesday after oil prices rose again and Wall Street deepened a sell-off that has led to the longest weekly losing streak since 2022 on fears that the Iran war will escalate.
The S&P/ASX 200 fell 9.3 points, or 0.1 per cent, to 8,451.70 by 10:55 AEDT in cautious trading, with six of 11 sectors trading lower. The ASX lost 0.7 per cent on Monday.
The Australian dollar was trading at 68.45¢ at 10.27am AEDT as investors await the latest RBA minutes, scheduled to be published later this morning, for clues on where interest rates will go.
Miners worried that the damage that the war would inflict on the global economy would affect the demand for resources such as iron ore, causing the local market to decline. BHP fell 1.2 percent, Fortescue Metals fell 1.1 percent and Rio Tinto fell 0.9 percent. Gold miners were in a mixed bag; Northern Star (up 0.9%) and Newmont (up 0.6%) were higher, while Evolution Mining lost 1.7%.
As oil supply-dependent stocks continued to wobble, airlines Qantas and Virgin Australia fell 0.6 per cent and 1.1 per cent respectively. Media company ARN fell 1.7 percent after Jackie “O” Henderson followed co-host Kyle Sandilands into taking the case to court after the duo’s $200 million contract was terminated this month. Henderson claims that his contract was unfairly terminated and demands compensation of “at least” 82 million 250 thousand dollars.
But modest gains in financial stocks, which account for about a third of the entire market, helped limit the ASX’s losses. CBA gained 0.1 per cent, while Westpac and ANZ Bank gained 0.5 per cent and National Australia Bank was unchanged.
Technology stocks were also among the gainers, with bargain hunters stepping in and sending WiseTech up 1.5 per cent, while fellow software makers Xero and Technology One gained 1.7 per cent and 0.4 per cent respectively.
Energy stocks again benefited from rising oil prices, with oil and gas giants Woodside and Santos gaining 1.2 percent respectively; Local refineries Ampol and Viva Energy increased by 1.1 percent and 2.8 percent due to the contraction in oil supply.
The decline on the ASX came after US stocks rebounded overnight as oil prices continued to climb due to uncertainty about when the war with Iran will end. The S&P 500 Index fell 0.4 percent after erasing its 0.9 percent gain at the beginning of the session. The benchmark stock index closed at its lowest level since August and is now less than 1 percent away from a correction.
The Dow Jones rose 0.1 percent and the Nasdaq composite fell 0.8 percent. Both were more than 10 percent below last week’s records; This is a steep enough decline that professional traders call it a “correction.”
Oil rose after US President Donald Trump threatened to escalate hostilities against Iran, raising fears that the war is far from over and global markets are braced for more chaos. West Texas Intermediate rose as much as 2.3 percent to $105.21 a barrel, after closing at its highest level since 2022 on Monday. Brent, the international standard, rose by 2 percent to $107.39.
“The tone on any breakout is one step forward, five steps back,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “With the market still effectively short of 10-12 million barrels per day, buffers are weakening and crude oil talk at lower levels becomes less effective.”
In his social media post, Trump said that if Iran does not reopen the Strait of Hormuz, the United States will blow up power plants, oil facilities and “possibly” desalination infrastructure.
His comments followed a whirlwind of action in the war over the weekend, including Yemen’s Houthi rebels entering the conflict. None of this clarified the fundamental questions weighing on financial markets: When will oil and natural gas resume their full flow from the Persian Gulf to customers around the world, and will it be soon enough to prevent a brutal burst of inflation?
Shortly before the US stock market opened for trading on Monday, Trump said on his social media network that “great progress has been made” with a “NEW, MORE REASONABLE REGIME to end our Military Operations in Iran.”
However, he also threatened the possibility of “blowing up and completely destroying” power plants in Iran if an agreement is not reached soon and the Strait of Hormuz, an important waterway for the flow of oil, is not immediately opened.
The statement fit and summarized the pattern of last week, when he declared progress in talks and offered some optimism for the market, but then doubts quickly grew about whether the war would end soon.
Amid all this, some investors say they are giving Trump’s statements less weight than before. Investors also took stock of mixed messages from Federal Reserve Chairman Jerome Powell. While the US central bank chief said the Fed will meet its 2 percent inflation target, he noted that he has little control over supply shocks such as the recent rise in energy prices due to turmoil in the Middle East. Policymakers may need to respond to the effects of the conflict if they haven’t already, he added.
Stock prices are still cheaper than before the war, causing some investors to look for a good time to buy.
Considering how much profit growth companies in the S&P 500 expect next year, the index looks about 17 percent cheaper than it was before the war, by one measure. That’s in a similar range to where previous growth fears in the market have ended, unless it leads to a recession or the Fed raising interest rates, according to strategists at Morgan Stanley.
This is one of the signs that strategists led by Michael Wilson point to as “increasing evidence that the S&P 500 is approaching the final stages of its correction.”
Treasury yields have jumped in the bond market on such concerns since the war began, but retreated slightly on Monday.
The yield on the 10-year Treasury note fell to 4.35 percent from 4.44 percent on Friday. This is a significant move for the bond market and gives Wall Street some breathing room. However, it remains well above the pre-war level of 3.97 percent.
With AP and Bloomberg
The Market Summary newsletter is a summary of the day’s transactions. Let’s each take ittoday afternoon.
