Wall Street wavers, Oil rises; ASX set to slip
Staff reporters
Updated ,first published
Australia’s stock market continues its roller-coaster ride on Thursday, opening lower as oil prices continue to rise despite a move by rich countries to release the largest amount of emergency oil reserves in history to combat the fuel price shock caused by the Iran war.
The S&P/ASX 200 was down 113.60, or 1.3 per cent, at 8629.90 by 10:39 AEDT, as miners, property and technology shares fell. The ASX gained 0.6 per cent on Wednesday, supported by banks, on bets that the Central Bank will raise interest rates next week to fight inflation, which is feared to rise due to the war. The Australian dollar was down 0.3 percent at 71.27¢.
Technology companies were the biggest losers in early trading, as news that Atlassian would lay off 10 percent of its workforce due to an AI outage raised concerns about the outlook for software makers. Fear of interest rate increases also negatively affects the interest-sensitive sector. WiseTech Global was down 4.6 percent, Xero was down 4 percent and Technology One was down 2.5 percent.
Financial shares, which make up a third of the ASX, shed some of their gains on Wednesday, putting pressure on the local market. CBA was down 1.4 per cent, National Australia Bank was down 1.3 per cent, Westpac was down 1.2 per cent and ANZ Bank was down 2.2 per cent.
The mining leaders also declined; Iron ore producers BHP and Fortescue lost 1.6 percent and Rio Tinto lost 0.6 percent. Gold miners Evolution Mining (down 1.3%) and Newmont (down 2.7%) fell as gold prices softened.
Real estate investment trusts also weakened. Data center owner Goodman Group lost 2.8 percent and shopping center landlords Scentre (down 1.7 percent), Stockland (down 1.3 percent) and Vicinity (down 1.8 percent) fell.
Meanwhile, energy companies also started to rise along with oil prices. Woodside gained 1.8 percent, Santos gained 2.4 percent, while Ampol, the country’s largest refinery, rose 2.2 percent.
The weak morning on the ASX followed a choppy, directionless trading session on Wall Street; The oil price resumed its rise approaching $120 per barrel at the beginning of this week. The S&P 500 index lost 0.1 percent for a second day of modest moves after a wild start to the week. The Dow Jones fell 0.6 percent and the Nasdaq composite rose 0.1 percent.
“In such an uncertain environment, markets and investors are hungry for any signal one way or another,” said Matthew Keator, managing partner of Keator Group, an asset management firm in Massachusetts.
“It’s all about the consumer and how the shock of the continued rise in oil prices will affect the consumer’s wallet and spending habits,” Keator added.
Sharp movements in oil prices since the beginning of the war have caused rises and falls in financial markets around the world, sometimes for hours. Oil prices briefly rose this week to their highest levels since 2022 as production in the Middle East was likely to be blocked for a long time, raising concerns about a debilitating inflation surge for the global economy.
A group representing many of the world’s richest countries agreed overnight to release the largest amount of emergency oil reserves in history to counter the effects of the Iran war on energy markets and the halt of cargo shipping through the Strait of Hormuz. The International Energy Agency said its members would provide 400 million barrels of oil from emergency reserves; That’s more than double the 182.7 million barrels the IEA’s 32 member countries have released in 2022 in response to Russia’s full-scale invasion of Ukraine.
The International Energy Agency said Wednesday that its members will release a record 400 million barrels of oil from emergency stocks. While such moves could keep oil prices in check in the near term, full market relief would likely require a complete restart of the flow of oil and natural gas from the Persian Gulf region. This has investors around the world anxiously awaiting the end of the war.
The barrel price of Brent crude oil, the international standard, increased by 4.8 percent to $91.98. The barrel of benchmark US crude oil increased by 4.1 percent to $90.78.
Concerns center on the Strait of Hormuz, a narrow waterway off the coast of Iran through which a fifth of the world’s oil passes on a typical day. The war stopped much of this traffic; This means that crude oil storage tanks in the region are full because the oil has nowhere else to go. This is pushing oil producers to say they will reduce their production.
The United States said it had destroyed more than a dozen mine-laying Iranian ships, and the Islamic Republic vowed to block the region’s oil exports, saying it would not allow “even a single liter” to be sent to its enemies.
All of this is happening at a time when inflation in the United States is already relatively high. A report released overnight showed that U.S. consumers paid 2.4 percent higher prices for food, gas and other living expenses in February than they did the previous year.
The inflation rate was the same as the previous month and was better than the 2.5 percent economists expected, but remains above the 2 percent target the Fed has set for the economy. It also does not include the oil price shock resulting from the war.
“Looking ahead, we expect a spring rise in inflation due to the rise in energy prices tied to the Iran war, and the duration of which will determine the landing point for headline inflation by the end of the year,” according to Gary Schlossberg, global strategist at Wells Fargo Investment Institute.
High inflation combined with a stagnant economy will create a worst-case scenario called “stagflation,” which the Federal Reserve does not have good tools to correct. Stagflation fears are rising not only because of higher oil prices but also because of weak hiring by U.S. employers.
Most stocks on Wall Street fell. Campbell’s lost 7.1 percent after the soup company reported weaker earnings than analysts expected in its latest quarter. The company, hurt by difficulties in its snacks business, has cut its revenue and profit forecasts for this fiscal year.
Helping to limit Wall Street’s losses was Oracle, which increased by 9.2 percent. The tech giant reported stronger profits and revenue than analysts expected in its latest quarter. It also raised its forecast for revenue growth next fiscal year, driven in part by demand for cloud computing for AI training and inference.
In other international markets, indices fell in Europe following the good performance in Asia. While Germany’s DAX index lost 1.4 percent, Japan’s Nikkei 225 index rose 1.4 percent.
AP via Reuters
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