Stocks extend rally on Mideast breakthrough hopes
Asian stocks joined a global rally on Friday on hopes that a Middle East peace deal could finally be achieved, while the dollar and bond yields fell and oil prices fell to two-month lows, easing inflation fears.
All eyes are on the highly anticipated launch of Elon Musk’s SpaceX, which made history with the largest IPO ever. The IPO valued the rocket and spacecraft maker at $US1.77 trillion ($A2.51), raising a record $US75 billion ($A106 billion) and making Musk the world’s first trillionaire.
President Donald Trump on Thursday said a peace deal could be signed as soon as this weekend, just hours after threatening more attacks on Iran. He said talks with Tehran have reached the highest levels of Iran’s leadership and have been approved by a broad coalition of regional powers.
Trump’s remarks came after the president’s repeated bouts of optimism that failed to reach a deal and shook market confidence.
However, Ray Attrill, National Australia Bank’s head of FX strategy, said: “This looks perhaps a little more concrete than what we’ve had.”
“Obviously if we hear something positive-sounding from Iran, the prospects for a peace deal will change quite dramatically.”
If approved, the deal would be the most significant diplomatic breakthrough to end a three-month war that has sent global energy prices sharply higher. The European Central Bank was forced to raise interest rates for the first time in nearly three years to nip war-induced inflation in the bud.
Oil prices fell to their lowest level in two months following the news of the agreement. US West Texas Intermediate (WTI) crude oil futures fell 1.9 per cent to US$86.08 ($A122.08) per barrel, following a 2.6 per cent drop overnight. Brent fell 1.5 per cent to US$89.08 ($A126.34) per barrel, after falling nearly 3.0 per cent overnight.
Japan’s Nikkei index rose 4.3 percent, while Australia’s resource-heavy shares rose 1.8 percent. South Korea’s KOSPI index increased by 8.3 percent.
Wall Street rebounded overnight as three major indexes posted their biggest daily gains since April 8, when the United States and Iran agreed to a temporary ceasefire. Nasdaq rose 2.5 percent, helped by expectations that Musk’s SpaceX will make a strong entry into the market.
Data showed U.S. producer prices rose more than expected in May, leading to the biggest annual gain in 3-1/2 years as conflicts in the Middle East drove up energy prices. On the labor market front, the number of Americans filing for unemployment benefits rose marginally last week, signaling continued labor market resilience in early June.
Treasury bonds gained ground as hopes for a peace deal in the Gulf rose and markets pared their bets on the Federal Reserve raising interest rates this year. The price hike in October increased from 51 percent to 36 percent.
Two-year Treasury yields were steady at 4.066 percent on Friday after falling 6 basis points overnight. Benchmark 10-year Treasury yields remained at 4.4631 percent after falling almost 8 basis points overnight.
The dollar pared losses on lower yields. The dollar index, which measures the dollar’s performance against major currencies, lost 0.4 percent overnight at 99.78.
After falling 0.4 percent in the previous session, it increased by 0.1 percent to 160.19 yen. With the yen remaining below the critical 160 level, investors are still on high alert for any intervention by Japanese authorities.
Precious metals relaxed a bit with the fall of the dollar. Spot gold rose 0.2 per cent to US$4,222 (A$A5,988) per ounce, following a 3.5 per cent rise overnight, while spot silver rose 0.3 per cent to US$67.52 (A$A95.76) per ounce, following a 5.8 per cent gain.
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