ASX set for more losses, oil poised to rise again
Stan Choe
US stocks deepen declines as Wall Street loses for fifth straight week; this was the longest streak in almost four years.
The S&P 500 fell 1.7 percent, ending its worst week since the start of the war with Iran. The Dow Jones lost 793 points, or 1.7 percent, more than 10 percent off its record last month, while the Nasdaq composite lost 2.1 percent. The Australian share market is poised for a decline, with futures settled on Saturday pointing to a loss of 65 points, or 0.8 per cent, at the open. The Australian dollar was trading at 68.86¢ at 5.15am AEDT.
The losses were a break from Wall Street’s pattern this week; The U.S. stock market plummeted from gains to losses each day as hopes for a possible end to the war rose and fell.
Oil prices continued to rise over the weekend due to the ongoing conflicts in the Middle East. Iran has shown no signs of backing down, and Israel has threatened to “escalate and expand” its attacks on Iran.
“This week’s diplomatic discord between the United States and Iran has spooked investors,” said Doug Beath, global equity strategist at Wells Fargo Investment Institute. “As of the weekend, risk appetite could not withstand the fog of war.”
“Any announcement from Trump regarding the deal is white noise for markets,” Jim Bianco, president and macro strategist at Bianco Research, wrote in a social media post. “But if the IRANIANS say the talks are going well, that will affect the markets.”
The barrel price of Brent crude oil increased by 4.2 percent to $112.57 on Saturday. This was at around US$70 just before the start of the war. Benchmark US crude oil rose 5.5 percent to $99.64 per barrel. Trading will resume on Monday morning.
The fear in financial markets is that the war will disrupt the Persian Gulf’s energy sector for a long time. This could keep enough oil and gas off world markets to send a punishing wave of inflation through the global economy.
Not only would this raise prices for motorists buying gasoline, but it could also force businesses that use any trucks, ships, or planes to move their products to raise their own prices. It will also make electricity from gas-fired power plants more expensive.
Strategists at Macquarie say the oil price could reach $200 a barrel if the war continues until the end of June. The record is just over $147, set in the northern summer of 2008. That’s when Iran’s missile tests that could reach Israel and strong oil demand from China helped prices soar despite the Great Recession.
High gas prices and war are already eroding the confidence of U.S. consumers, whose spending makes up much of the economy. Trust among them fell slightly more in March than in February than economists expected, according to a survey by the University of Michigan.
On Wall Street, most stocks fell, including three out of every four stocks in the S&P 500. The index, a key measure of the health of the U.S. stock market, is 8.7 percent below its all-time high set in January.
Big Tech stocks were among the heaviest weights in the market, including declines of 4 percent for Amazon, 4 percent for Meta Platforms and 2.2 percent for Nvidia.
Companies that sell non-essential items that customers might stop buying if they spend more on gas have also fallen sharply. Norwegian Cruise Line Holdings lost 6.9 percent, Starbucks lost 4.8 percent and Chipotle Mexican Grill lost 4.1 percent.
In total, the S&P 500 fell 108.31 points to 6,368.85 points. The Dow Jones Industrial Average decreased by 793.47 points to 45,166.64, and the Nasdaq composite index decreased by 459.72 points to 20,948.36 points. The Dow and Nasdaq are down more than 10 percent on record; That’s a steep enough decline that professional investors might call it a “correction.”
Following the mixed closing in foreign stock markets in Asia, indices in Europe fell.
Treasury yields have skyrocketed in the bond market, which has helped influence Trump’s actions in the past.
The yield on the 10-year Treasury bond rose to 4.48 percent, then fell to 4.43 percent. That’s up from 4.42 percent at the end of Thursday and 3.97 percent before the war began. The increase has already caused interest rates on mortgages and other loans for U.S. households and businesses to rise, slowing the economy.
High Treasury yields and bond market disruptions were big factors Trump cited when backing off his initial threats of global tariffs on “Independence Day” a year ago. These moves have led critics to claim that Trump is always shying away or using a “TACO” if financial markets show enough pain.
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