The Australian sharemarket rebounded on Thursday as investors stepped in to buy discounted stocks following a sharp global sell-off earlier in the week.
The S&P/ASX 200 closed up 39.10 points, or 0.44%, at 8,940.50, recovering part of the $63 billion wiped from the market on Wednesday, when the index plunged 1.9% amid escalating Middle East tensions and surging oil prices.
The index briefly climbed to an intraday high of 8,964.1, before trimming gains later in the session. Despite the moderation, the recovery ended a two-day losing streak that had erased 324 points (3.5%) from the benchmark’s recent record high.
Sector performance was led by Information Technology (+4.56%), Health Care (+1.92%), and Real Estate (+0.96%), while Materials (-0.48%), Industrials (-0.29%), and Consumer Discretionary (-0.05%) lagged.
Technology stocks drove the rebound, mirroring gains on Wall Street. DroneShield surged 10.12% to $3.70, Zip climbed 9.88% to $1.78, and WiseTech Global rose 7.14% to $47.57.
In the resources sector, BHP slipped 0.95% to $55.15 after trading ex-dividend, while Rio Tinto gained 1.16% to $164.56, supported by firmer iron ore prices.
Despite the recovery, ASX 200 futures are set to fall 125 points (1.4%) to 8,801 this morning, pointing to a weaker open as global markets reacted to renewed oil price volatility overnight.
Australian economy: Spending remains subdued
Fresh data highlighted continued pressure on household budgets.
Australian household spending rose 0.3% in January, below expectations, following a revised 0.5% decline in December.
The figures reinforce recent national accounts data showing household consumption growth of just 0.3% quarter-on-quarter, while the household savings ratio climbed to 6.9%, its highest level since September 2022.
The trend suggests households are directing income into savings rather than discretionary spending as cost-of-living pressures persist.
In the interest rate market, traders scaled back expectations of near-term tightening. Pricing now reflects just a 16% chance of a 25 basis-point RBA rate hike in March, down from 33% earlier in the week, with attention turning to signals ahead of the RBA’s March 17 board meeting.
US markets: Oil surge rattles investors
US equities retreated overnight as rising oil prices fuelled inflation concerns and pushed Treasury yields higher. The Dow Jones Industrial Average fell 1.6%, while the S&P 500 slipped 0.6% and the Nasdaq Composite eased 0.3%, as the conflict widened to involve additional countries.
Crude prices surged amid escalating tensions in the Middle East and fears of supply disruptions through the Strait of Hormuz, a critical global shipping route.
WTI crude rose to around $79.08, up nearly 4%, after briefly touching $82.16, its highest level in about 20 months.
The rally comes amid reports of tanker attacks in the region and reduced energy exports from parts of Asia as the conflict involving Iran entered its sixth day.
Despite the sharp move, crude remains well below the $100 levels seen during 2022 following Russia’s invasion of Ukraine, suggesting the current rally has yet to threaten global growth.
Attention now turns to the US February non-farm payrolls report, where economists expect 60,000 new jobs and an unemployment rate of 4.3%.
Money markets currently assign a 97% probability that the Federal Reserve leaves rates unchanged in March, with a 25 basis-point hike not fully priced in until October.
Europe: Energy concerns weigh on industrial stocks
European markets reversed early gains as the ongoing Middle East conflict and rising energy prices dampened investor sentiment.
The FTSEurofirst 300 fell 1.4%, while the UK’s FTSE 100 dropped 1.5%.
Export-focused industrial companies led declines, with the sector falling 2.4%. Siemens Energy slid about 6%, while defence groups Rolls-Royce and Rheinmetall each dropped more than 5%.
Banks lost 1.7%, travel and leisure stocks fell 1.8%, and mining shares declined 3.8% as metals prices weakened.
The broader aerospace and defence index fell 4.2%, marking its steepest daily decline since April.
Currencies: Aussie dollar slips
Currency markets were mixed against the US dollar.
- Euro: rose to US$1.1607
- Japanese yen: weakened to ¥157.50 per US dollar
- Australian dollar: fell 0.5% to US70.11 cents
The stronger US dollar reflected rising Treasury yields and persistent inflation concerns linked to energy prices.
Commodities: Oil jumps, metals retreat
Commodity markets saw sharp moves across energy and metals.
Oil
Global crude prices extended their rally, with Brent rising 4% to US$84.49 a barrel, supported by supply disruption fears linked to the Middle East conflict.
Base metals
Prices broadly declined as the stronger US dollar weighed on demand.
- Copper: down 1.7%, pressured by rising inventories.
- Aluminium: fell 2% after recent gains.
Gold
- Gold futures dropped 4.2% to around US$5,087 per ounce as higher Treasury yields and a firmer dollar reduced the appeal of the safe-haven metal.
Iron ore
- Iron ore futures rose 1.8% to US$100.89 per tonne, supported by renewed commitments from Chinese authorities to address overcapacity in the steel sector.
Looking ahead
Markets are now focused on several key US economic indicators due later today, including:
- February non-farm payrolls
- January retail sales
- February unemployment rate
The data will provide further insight into the strength of the US economy and whether rising oil prices are beginning to influence inflation expectations.