Australian shares are poised to open weaker, with ASX 200 futures down 70 points, or 0.8%, to 8645, tracking declines on Wall Street as escalating conflict in the Middle East fuels inflation concerns and drives oil prices higher.
The expected soft open follows renewed geopolitical tensions after Iran struck an energy facility in the United Arab Emirates, pushing crude prices sharply higher and weighing on global risk sentiment.
ASX closes lower ahead of RBA decision
The S&P/ASX 200 ended Monday down 32.7 points, or 0.4%, at 8697.1, as investors reduced exposure ahead of the Reserve Bank of Australia (RBA)’s widely anticipated interest rate decision.
Markets have priced in an 83% probability of a 25 basis point rate hike to 4.35%, with expectations of further tightening amid persistent inflation pressures.
Seven of 11 sectors finished lower, led by consumer staples and energy. Endeavour Group dropped 3.8% after flagging higher costs linked to the Middle East conflict, while Coles fell 3.9% following a broker downgrade and Woolworths eased 0.8%.
Energy stocks also weakened, with Woodside Energy down 3.1%, Santos off 1.4% and Viva Energy falling 3.2% as it works to restart its Geelong refinery unit.
Financials were mixed, with ANZ gaining 1.9% after an upgrade, while NAB slipped 1.6% despite posting $2.64 billion in first-half cash profit, slightly below expectations.
Technology stocks provided some support, tracking record highs on the Nasdaq. Life360 rose 6.2% and Xero added 2.9% on earnings optimism.
US markets retreat as geopolitical risks escalate
US equities pulled back from record levels, with the S&P 500 falling 0.4%, the Nasdaq down 0.2% and the Dow Jones losing 1.1%, as investors reacted to escalating Middle East tensions.
Ten of 11 S&P sectors declined, led by materials and industrials, while energy stocks advanced on the surge in oil prices.
Amazon rose 1.4% after unveiling a new logistics offering, while Atlassian jumped 4.9%, extending its post-results rally to nearly 35%.
Corporate activity drew attention, with GameStop shares tumbling 10% after proposing a US$56 billion acquisition of eBay, whose shares rose 5.1%.
Delivery firms FedEx and UPS dropped about 10% each after Amazon’s logistics expansion announcement, while Norwegian Cruise Line fell around 9% after cutting its outlook due to higher fuel costs.
Europe slides on oil surge and rate concerns
European markets also declined, with the FTSEurofirst 300 index down 1.1%, as rising oil prices and ongoing geopolitical tensions weighed on sentiment.
Euro zone banks led losses, falling 2.7% in their steepest one-day drop in more than six weeks, while automakers shed 2.1% after the US flagged plans to raise tariffs on EU vehicles to 25%.
Economic data showed mixed signals, with German manufacturing sentiment turning negative, while broader euro zone investor confidence improved slightly.
Currencies weaken against stronger US dollar
Major currencies softened against the US dollar amid rising geopolitical risk and inflation concerns.
- The euro fell 0.3% to US$1.1687.
- The Japanese yen slipped 0.1% to ¥157.23.
- The Australian dollar declined 0.4% to US$0.7164.
- US Treasury yields rose, with the 10-year yield up 6 basis points to 4.44% and the 2-year yield also climbing 6 basis points to 3.95%.
Commodities surge on supply fears
Oil prices rallied sharply following the latest Iranian strikes, with Brent crude jumping 5.8% to settle at US$114.44 per barrel.
Base metals weakened on concerns higher energy costs could dampen global growth, with copper down 2.3% and aluminium easing 0.2%.
Gold fell 2.4% to US$4,533 per ounce as a stronger US dollar and inflation fears reduced demand for the safe-haven asset.
Iron ore edged 0.3% higher to US$108.17 per tonne.
Outlook
Investors will be closely watching the RBA’s rate decision today, alongside Westpac’s first-half earnings. In the US, key economic data and earnings from major corporates including AMD, Pfizer and PayPal are due.