Wall Street climbs, oil higher; ASX set to rise
Stan Choe
Updated ,first published
The drop in oil prices helped the US stock market post its best day since the start of the war in Iran.
The S&P 500 gained 1 percent, its biggest gain in the last five weeks. The Dow Jones index rose 387 points, or 0.8 percent, and the Nasdaq composite rose 1.2 percent. The Australian share market is poised to rise, with futures pointing to a gain of 12 points, or 0.2 per cent, at the open. The ASX rose 0.4 per cent on Tuesday after the Reserve Bank announced an expected rate hike, but the central bank’s board was divided over the widely expected move, fueling speculation that further increases may be far from certain.
BHP will be in the spotlight after Australia’s largest mining company announced Brandon Craig will take over from Mike Henry in July after six years in the top role.
Woodside Energy announced that interim CEO Liz Westcott has been appointed to the role on a permanent basis. Westcott has led the company since Meg O’Neill left BP late last year.
The Australian dollar was trading at 71.06¢ at 9.08am AEDT.
The locomotive of the markets was once again the oil price. The benchmark US crude oil fell 5.3 percent to $93.50 a barrel, easing some of the pressure on the economy after exceeding $102 in the early morning hours. Brent crude oil, the international standard, fell by 2.8 percent to $100.21 per barrel, after previously rising to $106.50.
This is a reprieve, at least for now, after oil prices rose from around US$70 before the US and Israel began their attacks on Iran. In response, Iran has virtually halted traffic in the narrow Strait of Hormuz, through which one-fifth of the world’s oil reaches customers worldwide from the Persian Gulf. This causes oil producers to cut production because their crude has nowhere to go.
The concern in financial markets is that if the strait remains closed for a long time, enough oil could be kept off the market for inflation to rise to a level that would weaken the global economy.
President Donald Trump demanded over the weekend that other countries harmed by the closure of the Strait of Hormuz “deal with this passage” and said his country would “help A LOT.”
Meanwhile, European countries are also evaluating Trump’s plans and demand for war against Iran and want to learn more about when the conflict may end.
The U.S. stock market has a history of recovering relatively quickly from military conflicts in the Middle East and elsewhere, as long as oil prices don’t stay too high for too long. Many professional investors expect this to be the case again, helping keep U.S. stock prices near record levels.
Even with all the dramatic swings over the past few weeks, including hour-to-hour swings, the S&P 500 remains just 4 percent below its all-time high.
Of course, tensions are rising rapidly in war, but according to Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute, this could mean that “both sides face increasing constraints that could prevent a protracted conflict.”
On Wall Street, stocks of companies with large fuel bills led the market thanks to falling oil prices. Norwegian Cruise Line Holdings rose 5.1 percent, while United Airlines gained 4.2 percent to pare its huge losses for the year so far.
National Storage Affiliates jumped 30 per cent after Public Storage said it would acquire 69 million rentable square feet of space in an all-stock deal worth US$10.5 billion ($14.8 billion). Public Storage fell 1.7 percent.
Dollar Tree rose 6.4 percent after reporting stronger profits than analysts expected in its latest quarter despite fewer customers visiting its stores.
Nebius Group, a Dutch AI cloud company, saw its US-listed shares rise 15 percent after announcing a five-year infrastructure deal with Meta Platforms that could be worth up to $27 billion.
Nvidia, whose chips are powering much of the world’s transition to artificial intelligence technology, rose 1.6 percent after CEO Jensen Huang spoke about the possibilities of the technology at an artificial intelligence conference and said he predicted $1 trillion in demand for artificial intelligence chips by 2027. This was the single strongest force lifting the S&P 500.
Overall, the S&P 500 rose 67.19 points to 6,699.38. The Dow Jones Industrial Average rose 387.94 to 46,946.41, and the Nasdaq composite index rose 268.82 to 22,374.18.
In stock markets abroad, indices rose moderately in Europe, including the German DAX’s 0.5 percent return, after a mixed close in Asia.
Shares rose 1.4 percent in Hong Kong and fell 0.3 percent in Shanghai.
In the bond market, Treasury bond yields fell as falling oil prices eased inflation concerns. A report showing weakening manufacturing activity in New York state also weighed on yields.
The yield on the 10-year Treasury note fell to 4.22 percent from 4.28 percent at the end of Friday.
But yields are still higher than before the war, when the 10-year Treasury yield was just 3.97 percent. Investors postponed their expectations for when the Fed might resume interest rate cuts due to the rise in oil prices caused by the war.
Such cuts would boost the economy and job market, something Trump furiously wants, but they would make inflation worse. According to data from CME Group, investors see almost no chance of the Fed announcing a rate cut after its next meeting, which ends on Wednesday.
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