Australian shares are expected to open slightly higher on Wednesday, with ASX 200 futures up 13 points, or 0.2%, to 8,624, despite another bout of volatility on Wall Street and fresh geopolitical tensions in the Middle East.
Investor sentiment was unsettled after Iran reportedly shot down a US Apache helicopter near the Strait of Hormuz, prompting President Donald Trump to declare the US “must” respond. While futures remained in positive territory, they swung between gains and losses overnight as markets assessed the implications for global risk assets.
ASX 200 pares losses as defensives offset mining weakness
The Australian sharemarket finished slightly lower on Tuesday, recovering from steeper declines earlier in the session as concerns over Middle East tensions eased and technology stocks rebounded from Friday’s sharp sell-off.
The S&P/ASX 200 closed down 20.9 points, or 0.2%, at 8,604.2, after falling as much as 1.6% earlier in the day when trading resumed following Monday’s King’s Birthday public holiday.
Markets had initially reacted to a stronger-than-expected US jobs report, which prompted investors to reassess the outlook for US interest rates while geopolitical risks remained elevated.
Mining stocks led the declines as gold steadied near US$4,340 an ounce and iron ore hovered around US$100 per tonne. Newmont fell 4.8% to $141.68, Northern Star lost 3.3% to $19.22, while BHP, Rio Tinto and Fortescue dropped between 1.8% and 3.8%.
Technology stocks recovered some ground after early weakness. WiseTech Global closed down 4.6% at $38.00, Xero eased 1.1% to $78.42 and Megaport gained 3.0% to $19.04.
Defensive sectors helped limit broader losses. Coles rose 1.8% to $22.61 and Woolworths added 2.2% to $36.48, while healthcare heavyweight CSL gained 1.6% to $99.47.
Banking stocks finished mixed, with ANZ up 0.4% while Commonwealth Bank, Westpac and National Australia Bank ended lower.
Wall Street volatile as tech rebound fades
US markets finished mixed overnight as an early rally in technology stocks evaporated and investors weighed the prospect of renewed conflict involving Iran.
The Dow Jones Industrial Average rose 0.2%, while the S&P 500 fell 0.3% and the Nasdaq declined 1.0%.
Technology shares bore the brunt of the selling. Nvidia, Broadcom and Micron Technology fell between 0.2% and 4.4%, dragging the Philadelphia Semiconductor Index down 1.9% after it had surged as much as 3% earlier in the session.
The S&P 500 technology sector lost 1.8%, while Apple dropped 3.6% to US$290.55 after reaching a record high of US$317.40 during the previous session.
Market participants continued to attribute some of the volatility to investors taking profits from high-performing technology stocks ahead of SpaceX's highly anticipated initial public offering, expected to price later this week.
Elsewhere, J.M. Smucker jumped 10% after issuing stronger-than-expected earnings guidance, while cancer drug developer Nuvalent surged 39% after agreeing to a US$10.6 billion takeover by GSK.
Investors also digested reports that OpenAI had confidentially filed for a US IPO, adding another potential listing to the artificial intelligence investment theme.
European stocks extend losing streak
European markets surrendered early gains to finish lower for a third consecutive session as investors remained cautious over the durability of the Iran-Israel ceasefire.
The pan-European FTSEurofirst 300 Index fell 0.5%, while the UK’s FTSE 100 declined 1.4%.
Technology stocks lost 1.3%, mirroring weakness in US peers, while telecom stocks dropped 2.0% after reports suggested Nvidia's ambitions in future mobile network technology could pose competitive risks to traditional equipment suppliers.
Defence stocks also weakened following a broker downgrade of the sector.
Currencies and bonds
Currency markets were mixed against the US dollar.
- Euro: up 0.2% to US$1.1543
- Japanese yen: down 0.1% to ¥160.36 per US dollar
- Australian dollar: down 0.2% to US70.26 cents
US Treasury yields edged lower ahead of key inflation data due later on Wednesday.
- US 10-year Treasury yield: down 3 basis points to 4.52%
- US 2-year Treasury yield: down 4 basis points to 4.12%
Commodities
Commodity markets generally weakened as investors positioned ahead of US inflation data and monitored developments in the Middle East.
- Oil: Brent crude: down 3.0% to US$91.45 a barrel, its lowest level in seven weeks
- Gold: Gold futures: down 1.8% to US$4,286 an ounce
Base metals
- Copper: down 0.4%
- Aluminium: down 1.8%
Iron ore
- Iron ore futures: up 0.3% to US$101.37 a tonne, snapping a four-session losing streak
Looking ahead
Investors will focus on inflation data over the next 24 hours, with the US Consumer Price Index due for release later on Wednesday.
In Asia, markets will also receive China's Consumer Price Index and Japan's Producer Price Index, providing further insight into regional inflation trends and central bank policy expectations.