The ASX is set for a softer start on Friday, with futures down 5.4 points (-0.06%) at 9:35 am AEST, as markets take a breather after a strong multi-day rally driven by easing geopolitical fears and a sharp unwind in energy prices.
The subdued lead comes despite another positive session on Wall Street, with investors shifting into a more cautious stance as uncertainty around the Middle East ceasefire and global inflation outlook persists.
Wall Street extends gains, but momentum narrows
US markets pushed higher overnight, with the S&P 500 rising 0.62%, the Dow Jones up 0.58% and the Nasdaq gaining 0.83%, marking a seventh consecutive day of gains for the benchmark index.
The rally was less broad than earlier in the week, with most sectors finishing higher but clear pockets of weakness emerging. Consumer discretionary led gains, while energy stocks declined and healthcare slipped slightly.
Technology performance was mixed. While semiconductor and AI-linked names held firm, software stocks came under renewed pressure, with the iShares Expanded Tech-Software ETF falling nearly 4% to its lowest level since late 2023.
The divergence reflects a market beginning to differentiate more sharply between sectors, rather than the broad risk-on rebound seen earlier in the week.
Ceasefire holds, but tensions remain elevated
Geopolitics remain central to the market narrative.
The US and Iran continue to signal progress towards negotiations, with President Donald Trump expressing optimism around a broader deal. However, the situation remains fragile, with reports of ceasefire violations and ongoing Israeli strikes in Lebanon clouding the outlook.
Shipping activity through the Strait of Hormuz remains severely constrained, with only one oil products tanker reportedly passing through in the past 24 hours.
That disconnect between headline progress and on-the-ground conditions is keeping markets cautious, particularly in energy and commodities.
Commodities reflect mixed signals
Commodity markets are sending a similarly mixed message.
Oil prices rebounded, with WTI crude rising around 3.8% to just under US$98 a barrel, after the sharp sell-off earlier in the week.
However, underlying supply constraints remain unresolved, with disruption to infrastructure and shipping flows continuing to limit available supply.
Elsewhere:
- Gold rose about 1% to US$4,768/oz, supported by lingering uncertainty
- Copper edged slightly lower, reflecting a more cautious tone around global growth
- Iron ore also weakened, amid concerns around demand and softer Chinese activity
The combination points to a market still balancing improved sentiment with unresolved risks.
Currency markets remained relatively steady, with the Australian dollar holding around US$0.708.
Meanwhile, bond yields were little changed, with the US 10-year yield near 4.29%, while volatility continued to ease, with the VIX falling below 20.
Despite the pullback in volatility, the underlying macro backdrop remains fluid, particularly across energy and inflation expectations.
ASX edges higher as tech reverses and defensives rebound
Locally, the S&P/ASX 200 rose 0.24% to 8,973.2 on Thursday, extending its gains but with a clear shift in sector leadership.
The session saw a rotation away from growth and into more defensive areas:
- Energy rose 2.58% as oil prices stabilised
- Utilities gained 1.92%
- Financials added 1.21%
In contrast, previously strong sectors pulled back:
- Information technology fell 6.46%
- Healthcare dropped 1.21%
- Consumer discretionary declined 0.89%
Among notable movers:
- Bendigo and Adelaide Bank surged 8.4% on stronger-than-expected quarterly profit and planned AI-related job cuts
- Orora plunged 18% after downgrading earnings guidance
- Sandfire Resources fell 4% on softer production expectations
The divergence highlights a market becoming more selective after the recent surge.
What to watch today
Markets are likely to remain headline-driven, with several key catalysts ahead.
- China CPI (11:30 am AEST): A key read on regional demand and inflation pressures
- US CPI (overnight): Expected to show a sharp monthly rise, driven by higher energy prices
- Ceasefire developments: Any escalation or breakdown in negotiations could quickly shift sentiment
There is also some pressure building in technology stocks, with weakness in US-listed software names likely to weigh on the local sector.
After a strong rebound across global markets, the next phase may be more uneven — with investors increasingly focused on earnings, inflation and whether the current ceasefire can hold.