Australian shares are expected to open sharply lower today despite a strong lead from Wall Street, where investors piled back into risk assets after Donald Trump announced an interim deal with Iran.
ASX 200 futures were down 110 points, or 1.2%, at 8,815, pointing to a weaker start for the local market.
The expected fall comes ahead of the Reserve Bank of Australia (RBA)’s interest rate decision at 2.30pm, with markets expecting the central bank to leave rates on hold.
Investors will also be watching a suite of Chinese economic data, including retail sales and unemployment figures, while the Bank of Japan is expected to raise rates by 25 basis points to 1%.
ASX rallies to 2-month high
The S&P/ASX 200 surged 110 points, or 1.25%, yesterday to close at 8,914, its highest level since mid-April, as news of the US-Iran agreement eased geopolitical concerns and sent oil prices sharply lower.
The deal is expected to end hostilities and reopen the Strait of Hormuz, easing fears of disruption to global oil flows and reducing inflation concerns.
Seven of the 11 ASX sectors closed higher, with materials leading the gains as gold climbed to around US$4,311.82 an ounce after falling more than 20% during the conflict.
Newmont rose 6.8% to $147.18, Regis Resources jumped 13.3% to $6.63 and Ora Banda Mining added 16.3% to $1.28.
Mining heavyweight BHP advanced 3.6% to a record $65.18 as copper moved towards US$14,000 a tonne on the London Metal Exchange.
Banks also gained on hopes of an improved economic outlook. Commonwealth Bank rose 1.4% to $161.79, National Australia Bank added 2.6% to $37.46, while ANZ and Westpac were each up about 1%.
Energy stocks were the main drag as crude prices tumbled. Santos fell 8.1% to $7.42, Viva Energy dropped 5.8% to $2.12 and Woodside Energy lost 5.7% to $29.46 after rejecting reports that ExxonMobil was considering a bid.
Coles eased 2.1% to $23.51 as investors rotated out of defensive names and back into risk assets.
“Investors treated news of a US-Iran interim agreement to reopen the Strait of Hormuz like the lifting of a roadblock on a major economic highway,” Global X investment strategist Marc Jocum said.
“While the geopolitical risk premium is beginning to fade, it has not disappeared entirely.”
Wall Street surges on relief rally
US share markets rose strongly on Monday, with the Dow Jones Industrial Average hitting a record closing high after the United States and Iran struck a preliminary agreement to end the Middle East conflict and reopen the Strait of Hormuz.
The Dow finished 0.9% higher, the S&P 500 gained 1.7% and the Nasdaq added 3.1%.
The S&P 500 was on track for its best session since April, while the VIX fell for a third straight day as volatility eased.
Seven of the 11 major S&P 500 sectors finished in positive territory, with technology leading the advance. The S&P 500 technology index rose 3.4%, while the Philadelphia Semiconductor Index hit a record high and gained 5.5%.
Nvidia rose 3.5%, while memory chipmakers also climbed, with Micron soaring almost 11% after several brokerages raised their price targets.
The sharp fall in oil prices supported energy-sensitive airline and cruise stocks. United Airlines rose 3.8%, Delta Air Lines added 1.6% and American Airlines gained 3.2%, while Norwegian Cruise Line and Carnival advanced about 4% each.
Energy majors were weaker, with ExxonMobil and Chevron each falling more than 3%.
SpaceX (NASDAQ:SPCX) shares jumped 20% on their second day of trading, extending Friday’s 19% rally and adding US$412 billion, or around A$580 billion, in market value.
The shares closed at US$192.46 on Monday, more than 42% above their US$135 IPO price, lifting the company’s market value to more than US$2.5 trillion.
Fox shares slumped 16% after the company agreed to buy streaming platform Roku for US$22 billion.
Europe hits record high
European share markets also benefited from the global relief rally, with the continent-wide FTSEurofirst 300 index ending 0.2% higher, while the UK’s FTSE 100 slipped 0.4%.
Spain’s financials-heavy index led gains among major regional markets, climbing 1.4% to a record high.
Germany’s DAX rose 1.1% to a near 2-week high.
Banks were among the strongest performers, rising 1.5% to their highest level since January 2008, while energy price-sensitive auto stocks gained 2.6%.
Airlines also advanced as oil prices fell, with Lufthansa up 4.5% and Air France gaining 3.4%.
In corporate news, Renault Group rose 3.7% after the carmaker said it would develop a military vehicle in partnership with defence technology company Thales.
Currencies and bonds
Currencies were mixed against the US dollar.
- The euro rose 0.2% to US$1.1588.
- The Japanese yen slipped 0.1% to JPY160.32.
- The Australian dollar advanced 0.3% to US70.70 cents.
US government bond yields fell to a 1-month low as oil prices slid following the announcement of the preliminary Iran agreement.
The US 10-year Treasury yield declined 1 basis point to 4.47%, while the US 2-year Treasury yield fell 2 basis points to 4.07%.
Commodities
Oil prices slumped to a 3-month low after Trump said the United States and Iran had signed a memorandum of understanding aimed at ending the conflict.
Brent crude futures settled down 4.8% at US$83.17 a barrel, after falling as much as 5.7% during the session.
The agreement is expected to pave the way for oil flows to resume through the Strait of Hormuz, although shipowners were still seeking further details before committing to transit.
Base metals were mixed.
- Copper futures rose 0.8% on expectations the Iran agreement would support global economic growth, while aluminium futures dropped 4.2% to their lowest level in more than 2 months as easing supply concerns weighed on prices.
- Gold futures rose for a third consecutive session, settling 2.7% higher at US$4,351 an ounce.
- Iron ore futures were steady, up 0.3% to US$101.94 a tonne.