The Australian sharemarket is poised for a weaker start on Tuesday, with SPI futures at 6.17am AEST pointing to an 11-point, or 0.1%, decline at the open as investors digest escalating geopolitical tensions and a sharp jump in oil prices.
ASX ends little changed after volatile session
The local market finished virtually flat on Monday after surrendering early gains as renewed uncertainty following further US strikes on Iran weighed on investor confidence.
The S&P/ASX 200 edged up just 2.5 points to 8,808, having traded higher earlier in the session as Brent crude oil surged around 3% at the open.
Energy stocks led the gains, with Ampol climbing 4.5%, Woodside adding 1% and Santos rising 0.3% as higher oil prices supported the sector.
Mining stocks delivered a mixed performance. Fortescue gained 1.3%, while BHP and Rio Tinto eased slightly. Gold miners weakened as bullion prices slipped, with Northern Star Resources falling 2.6% and Evolution Mining losing 1.5%.
Technology stocks remained the market's weakest link, extending a difficult year for the sector. WiseTech Global declined 2.2%, Xero dropped 4.6%, NextDC lost 3.3%, while Weebit Nano slumped 10.5% after last week's strong rally.
Wall Street slides as Trump announces Iran blockade
US markets retreated after President Donald Trump announced plans to reinstate a naval blockade on Iranian ports and impose a 20% fee on cargo passing through the Strait of Hormuz, sending oil prices sharply higher and dampening investor risk appetite.
Technology stocks led the declines, with semiconductor shares particularly hard hit. The Philadelphia Semiconductor Index underperformed as Sandisk, Marvell Technology and Western Digital fell between 4.8% and 12.6%, while Nvidia lost 3.5%. US-listed shares of SK Hynix tumbled 9% following last week's Nasdaq debut rally.
The Dow Jones Industrial Average fell 0.3%, the S&P 500 lost 0.8%, and the Nasdaq Composite dropped 1.6%.
European markets tread water
European markets were subdued as investors remained cautious amid renewed Middle East tensions while awaiting the start of the corporate earnings season.
Energy stocks outperformed, rising 2.2%, while defence shares slipped 1.4%. Travel and leisure stocks fell 1.2%, with Lufthansa, Ryanair and TUI all weaker. Technology stocks also declined 0.6%, mirroring weakness on Wall Street.
The pan-European FTSEurofirst 300 and the UK's FTSE 100 both finished flat.
Currencies and bond yields
The US dollar strengthened against major currencies as rising oil prices fuelled inflation concerns.
- The euro slipped 0.3% to US$1.1379.
- The Japanese yen weakened 0.5% to ¥162.46 per US dollar.
- The Australian dollar eased 0.6% to US69.13 cents.
US Treasury yields climbed after Federal Reserve Governor Christopher Waller suggested interest rates may need to rise if inflation remains above target. The 10-year Treasury yield increased 5 basis points to 4.62%, while the two-year yield rose 7 basis points to 4.28%.
Commodities
Oil prices surged after President Trump's announcement on Iran, reigniting concerns over energy supplies through the Strait of Hormuz.
- Brent crude jumped 9.6% to settle at US$83.30 a barrel.
Base metals proved resilient despite geopolitical tensions.
- Copper is holding steady.
- Aluminium gained 0.5%.
- Gold futures fell 2.6% to US$4,006 an ounce as higher bond yields and inflation concerns reduced the appeal of the precious metal.
- Iron ore futures edged 0.4% lower to US$98.31 a tonne amid ongoing weakness across China's steel sector.
Looking ahead
Australian investors will be watching the latest Westpac consumer sentiment survey and NAB business confidence data today.
In the US, earnings season gathers pace with results due from JPMorgan Chase, Bank of America, Goldman Sachs and Citigroup. Markets will also closely monitor the latest US Consumer Price Index, with annual inflation expected at 3.9%, while Federal Reserve Chair Kevin Warsh is scheduled to testify before a government committee.