Staff writers
Updated ,first published
Australia’s stock market slumped on Tuesday after US and Israeli warplanes hit Iranian ships in the Strait of Hormuz and elsewhere, raising doubts about an end to the war, hours after President Donald Trump suggested peace talks with Tehran were underway.
The S&P/ASX 200 ended down 34.2 points, or 0.4 per cent, at 8657.80, with miners the only sector in the green. The crisis came after The ASX rose 0.4 per cent on Monday since the hope of an agreement to end the war between the United States and Iran has strengthened the confidence of investors and reduced the price of oil. The Australian dollar was down 0.1 percent at US71.67¢ in afternoon trade.
The strikes, which included attacks on Iranian missile sites and mine-laying boats, were carried out “to protect our troops from threats posed by Iranian forces,” but the military “used restraint during the ongoing ceasefire”, a US military spokesman said in a statement.
Attack of the United States and Israel it was done south of Larak Island in the Strait of Hormuz, with several Iranian workers killed, Iran’s Nour News agency reported. Trump previously said talks with Iran on an agreement to extend the ceasefire and reopen the channel were “going well”.
“The market will be cautious, given how previous hopes of a deal have been dashed,” said Abbas Keshvani, director of Asia global strategy at RBC Capital Markets in Singapore.
The fresh fighting highlights the fragile nature of the existing ceasefire, as do growing expectations for a long-term accord and the reopening of the strait. The vital waterway has been blocked since the US and Israel attacked the Islamic Republic in late February, causing an energy crisis and triggering a wave of global inflation.
Global stocks rose to record highs overnight and crude oil fell after officials signaled the US and Iran were nearing a deal to reopen the pipeline and restore oil flows. However, Brent crude rebounded after reports of recent clashes, rising 2.4 percent to $US98.46 a barrel, while West Texas Intermediate was around $US92.
Despite rising oil prices, energy stocks ended the day lower as peace talks continued, extending their losses from Monday. Oil and gas giant Woodside slipped 0.1 percent, rival Santos shed 0.9 percent, while oil refiner Ampol was down 0.7 percent and Viva Energy shed 0.9 percent. Coal miners Yancoal and Whitehaven fell 3.3 percent and 3.1 percent, respectively.
The talks will still “take a few days” as both sides discuss the language in the initial document, Secretary of State Marco Rubio told reporters in India on Tuesday.
Financial stocks also fell, weighing on the broader market. CBA was down 0.2 percent, Westpac lost 0.4 percent, while National Australia Bank fell 0.8 percent and ANZ Bank lost 0.3 percent.
Stock exchange operator ASX Ltd fell 13.3 per cent after it reported it would increase its capital expenditure to $200 million in the new financial year to upgrade key market infrastructure. The spending shock comes as the company seeks to regain the confidence of regulators and stakeholders after years of technical issues.
Shares in Flight Center lost 3.5 percent after the travel agency said in a trading update its early fourth-quarter results were “significantly impacted” by tensions in the Middle East, with flight cancellations and customer refunds resulting in a $10 million loss in April, with a bigger loss expected in the regular trading months of May and June.
Services and consumer staples were also weak as hopes of an agreement to end the war persisted, prompting some investors to move away from defense sectors. Power companies Origin Energy and AGL were down 2.3 percent and 2.8 percent, respectively, while majors Woolworths and Coles fell 0.8 percent and 0.6 percent. Telstra shares shed 0.9 per cent.
Bucking the trend, Kogan shares rose 18.6 percent after the retailer said its revenue rose 25.4 percent to $26.9 million in the 10 months to April 30 as its Mighty Ape business turned around and Kogan.com showed strong profits.
The overall market loss on the ASX came as futures on the S&P 500 rose 0.6 per cent, while those on the Nasdaq 100 rose 0.9 per cent. Wall Street was closed overnight for the Memorial Day holiday.
Hopes of an end to the war, which is weighing heavily on the world economy, had immediately boosted markets around the world. The MSCI All-Country World Index, the broadest measure of global shares, rose 0.5 percent to an all-time closing high. The European benchmark Stoxx 600 gained for the sixth consecutive session to close at the highest level since the outbreak of the war.
“The obvious cause of FOMO is contributing to an unexpectedly strong global risk appetite: investors don’t want to be left out if the Iran war comes to an end while the AI theme continues to lift the stock market,” said Dana Malas, SEB strategist.
At the same time, traders also remain focused on inflation. They have fully priced in a Federal Reserve rate hike by the end of the year, underscoring expectations that new US central bank chairman Kevin Warsh will need to act quickly. Later this week, US Personal Consumption Expenditure data and inflation readings across Europe will provide clues about price pressures and the direction of interest rates.
Warsh, who has promised the biggest change in decades at the US central bank, he was sworn in on Friday. Trump stressed that he wants Warsh to lead the Fed independently, as he looks to ease investor concerns that he would pressure the new central bank chief on policy decisions.
The Fed may have enough reasons to justify interest rate cuts rather than increases under new chairman Warsh, according to BlackRock.
Elsewhere, China launched an unprecedented campaign against illegal cross-border trading to stem capital outflows, threatening stiff penalties against prominent brokers and ordering non-compliant accounts to be closed within two years.
with AP, Bloomberg
The Market Recap is a summary of the day’s trading. Let’s find each otherekday afternoon.
