The Australian sharemarket is expected to open lower today, with futures pointing to a decline of 22 points, or 0.2%, as investors contend with rising oil prices and a more hawkish US interest rate outlook.
ASX extends monthly winning streak
The S&P/ASX 200 began the week in negative territory but still recorded its fifth consecutive calendar month of gains, capping a broadly positive company earnings season.
The benchmark fell 16.3 points, or 0.18%, to 9,076 on Monday, while the broader All Ordinaries declined 22.9 points, or 0.25%, to 9,271.4.
The market surrendered an early advance as traders assessed a more hawkish US interest rate outlook and rising oil prices following renewed fighting between the US and Iran.
Brent crude’s move above US$90 a barrel helped refinery operators Ampol and Viva Energy gain more than 2.3% apiece.
Month-end portfolio rebalancing also influenced trading. Financial stocks recovered on Monday but still finished the month almost 6% lower, while materials shares declined during the session but remained 11.6% higher for the month.
Australian inflation figures due on Wednesday will be closely watched amid concerns that persistent price pressures and weak economic growth could increase the risk of stagflation and further Reserve Bank interest rate increases.
Wall Street retreats as inflation fears return
US sharemarkets weakened on Monday as the oil price surge renewed inflation concerns and raised the prospect of tighter monetary policy.
Iranian President Masoud Pezeshkian said Tehran was still seeking a negotiated resolution after several days of intensified airstrikes and mounting hostilities following new US economic sanctions.
The Dow Jones fell 374.09 points, or 0.7%, to 53,185.90, while the S&P 500 declined 0.3% to 7,686.14 and the Nasdaq lost 0.1% to 26,370.89.
Energy was the strongest of the S&P 500’s 11 sectors, with Halliburton and Valero Energy both gaining 1.9%.
Utilities were among the weakest sectors after amendments to legislation in California did little to address grid operators’ exposure to wildfire liabilities. PG&E plunged 20%, marking its largest percentage decline in more than six years.
Technology shares provided some support. Nvidia gained 1.4%, while Sandisk and Qualcomm advanced 5.5% and 3.8%, respectively.
US government bond yields were mixed. The 10-year Treasury yield touched its highest level since January, rising around 3 basis points to 4.76%, while the two-year yield was broadly steady at 4.35%.
European markets fall as energy costs rise
European sharemarkets also retreated as renewed US-Iran military strikes drove oil prices and bond yields higher.
The continent-wide FTSEurofirst 300 index closed 0.7% lower, while Germany’s DAX dropped 1.2% — the steepest fall among the major regional markets.
German inflation accelerated in August as the conflict lifted energy prices, although the increase was smaller than expected and core inflation remained stable.
Energy companies strengthened alongside oil prices, with TotalEnergies, Orlen and OMV gaining between 1.5% and 3.5%.
French semiconductor materials producer Soitec jumped 6.4% after its chief executive said the company was securing customers through multi-year supply agreements featuring deposits and fixed pricing.
The UK FTSE 100 was closed for a bank holiday.
Australian dollar holds steady
Major currencies were mostly stronger against the US dollar.
- The euro gained 0.3% to US$1.1614.
- The Japanese yen strengthened 0.2% to 159.74 per US dollar.
- The Australian dollar was broadly unchanged at US71.63 cents, while the British pound traded at US$1.3543 and the New Zealand dollar at US59.14 cents.
Oil climbs above US$90
Global oil prices rose sharply after renewed military action between the US and Iran reignited concerns about supply disruptions as the conflict entered its sixth month.
- Brent crude gained 2.7% to settle at US$90.49 a barrel, while US Nymex crude advanced 2.8% to US$85.76.
- Gold futures fell 1.1% to US$4,481.50 an ounce, hovering near a two-week low as higher oil prices added to inflation concerns. Spot gold was trading around US$4,446.74 an ounce.
Base metals were mixed.
- Copper futures gained 0.5% to US$6.5935 a pound after figures showed Chilean production had been disrupted by recent poor weather, while aluminium eased 0.1% to US$3,376.50 a tonne.
- Iron ore futures rose 0.2% to US$96.05 a tonne, supported by higher freight and energy costs, although stronger coking coal prices squeezed steel mill margins and limited gains.
Looking ahead
Australian building approvals data will be released today, while Fortescue, Bendigo and Adelaide Bank (ASX:BEN) and Endeavour Group are among the companies trading ex-dividend.
In the US, investors will receive manufacturing PMI figures, JOLTS job openings and construction spending data. Palo Alto Networks and Medtronic are also scheduled to report earnings.