The Australian sharemarket is expected to open higher on Monday after the United States paused its near two-week campaign of strikes against Iran and Tehran signalled it would refrain from retaliatory attacks.
ASX futures were pointing to a gain of 48 points, or 0.6%, at the open as investors assessed signs of de-escalation, including talks between Iran and Oman over the Strait of Hormuz.
Attention will turn to Australia’s June inflation figures on Wednesday, the final major economic release before the Reserve Bank of Australia’s August 11 policy meeting.
RBA governor Michele Bullock is also due to speak at a fundraising event on Tuesday.
ASX suffers worst session in five weeks
The positive futures signal follows a difficult end to last week, with the S&P/ASX 200 falling 66.7 points, or 0.75%, to 8,772.3 on Friday.
The All Ordinaries declined 76.6 points, or 0.85%, to 8,941.5, while the benchmark ASX 200 finished the week 0.28% lower after three consecutive sessions of gains were erased by Friday’s sell-off.
Basic materials stocks led the decline, falling 2.8% as miners came under pressure. The sector still finished the week 1.7% higher following earlier gains in copper and gold prices.
Consumer discretionary, industrial and technology stocks also weakened as investors weighed the implications of higher oil prices for inflation, household spending and interest rates.
ASX-listed technology shares declined for a third consecutive week, while healthcare stocks fell for a sixth straight session amid concerns about fresh US tariffs, including proposed 100% duties on imported generic drugs.
Energy stocks were among the week’s strongest performers, rising almost 6% as elevated crude prices supported Woodside Energy Group, Santos, Viva Energy and Ampol.
Financial stocks helped limit Friday’s losses, gaining 0.9% as the major banks and insurers extended the sector’s winning streak to five weeks.
US markets mixed as technology stocks retreat
US sharemarkets finished mixed on Friday as investors reduced their exposure to technology stocks ahead of another major week of corporate earnings.
The Dow Jones Industrial Average rose 0.5% and the S&P 500 added 0.1%, while the Nasdaq Composite declined 0.6%.
The technology sector fell 0.9%, with the Philadelphia Semiconductor Index tumbling 4.5%.
Intel shares dropped 8% despite forecasting quarterly profit and revenue above Wall Street expectations and outlining plans to increase investment over the next two years.
Real estate was the strongest S&P 500 sector, rising 2.4%, as Digital Realty Trust surged 11% after upgrading its full-year funds-from-operations forecast.
Materials stocks gained 1.4%, led by an 11% rise in International Paper.
US Treasury yields eased from 18-month highs as oil prices retreated. The 10-year Treasury yield fell two basis points to 4.68%, while the two-year yield declined three basis points to 4.34%.
The Federal Reserve is expected to leave interest rates unchanged at its meeting on Wednesday, although markets will closely monitor its assessment of inflation risks.
Microsoft and Meta are due to report earnings on Wednesday, followed by Apple and Amazon on Thursday.
European markets rebound on earnings
European sharemarkets rose on Friday, recovering from their sharpest one-day fall in two weeks as investors responded positively to selected corporate earnings.
The pan-European FTSEurofirst 300 index advanced 0.9%, while the UK’s FTSE 100 also gained 0.9%.
SAP climbed 10% after the software group reported stronger-than-expected growth in its second-quarter current cloud backlog.
The broader European technology index rose 1.7%, recovering some of the ground lost after disappointing updates from STMicroelectronics (NYSE:STM) and BE Semiconductor.
Volkswagen slipped about 1% after withdrawing its previous revenue growth forecast following a 10% fall in second-quarter profit.
Currencies strengthen against US dollar
Major currencies were stronger against the US dollar.
- The euro was trading at US$1.1399.
- The Japanese yen at 163.68 per US dollar.
- The Australian dollar sits at US$0.7001.
Oil retreats as China pushes for renewed talks
Global oil prices fell sharply after reports that China was seeking to revive stalled peace talks between the United States and Iran.
- Brent crude futures settled 3.9% lower at US$96.78 a barrel, having traded above US$100 during the previous session as the Middle East conflict expanded towards the Red Sea.
- Copper futures edged 0.3% higher as inventories outside the US tightened.
- Aluminium futures declined 1% following reports that the US could reduce import tariffs from 50% to 25% for companies investing in American manufacturing capacity.
- Gold futures settled 0.5% higher at US$4,071 an ounce as investors continued to assess the Middle East conflict and its implications for inflation and interest rates.
- Iron ore futures were little changed, easing 0.1% to US$98.42 a tonne.
Looking ahead
Australian investors will focus on June consumer price index data on Wednesday, which could influence expectations for the RBA’s August meeting.
In the US, durable goods orders are due on Monday, followed by the Federal Reserve’s interest rate decision on Wednesday and a series of results from the world’s largest technology companies.