The Australian sharemarket is expected to rebound modestly after Tuesday’s sharp decline, despite Wall Street retreating as escalating US-Iran hostilities pushed oil prices towards US$100 a barrel.
ASX 200 futures were pointing to a gain of 21 points, or 0.2%, at the open.
Higher copper and iron ore prices could support Australian mining stocks, while rising energy prices continue to fuel concerns about inflation and further interest-rate increases.
ASX looks to recover after 1% fall
The S&P/ASX 200 dropped 1% on Tuesday as investors responded to higher global bond yields, rising oil prices and renewed expectations of tighter US monetary policy.
Wednesday’s positive futures signal points to a partial recovery, although global risk appetite remains fragile.
Copper surged 2.4% and iron ore edged higher, delivering a favourable lead for resources stocks. Energy companies could also benefit from the continued rise in oil prices.
Wall Street retreats after long weekend
US stocks closed lower in their return from the Labor Day holiday as rising oil prices increased concerns about inflation and interest rates.
The Dow Jones Industrial Average dropped 628.18 points, or 1.2%, to 52,786.07. The S&P 500 declined 0.6% to 7,673.52 and the Nasdaq Composite fell 0.3% to 26,421.41.
Lumentum Holdings led the S&P 500 gainers with a 10.94% rise, followed by Intel, up 8.88%, and Hewlett Packard Enterprise, which advanced 7.90%.
Qualcomm gained 3.2% after announcing a partnership with Amazon to develop large-scale artificial intelligence data centres. The agreement gives Amazon the right to acquire up to 25 million Qualcomm shares at US$161.26 each.
Howmet Aerospace fell 10.70%, Amgen declined 10.08% and Stryker lost 8.81%.
Boston Scientific dropped 5.9% after warning that a cybersecurity-related network outage would prevent it from meeting third-quarter and full-year sales and earnings forecasts.
US-listed shares in Novartis tumbled 13.9% following disappointing trial results for an experimental treatment for myotonic dystrophy type 1.
Inflation reports loom
Brent crude briefly reached US$99.46 a barrel, adding to inflation concerns ahead of two important US price reports.
Producer-price inflation data will be released on Thursday, with economists expecting annual wholesale inflation to accelerate to 5.4% from 4.7% in July.
Consumer inflation figures follow on Friday. Annual inflation is expected to ease slightly to 3.3% from 3.4%, but would remain well above the Federal Reserve’s 2% target.
Markets are pricing in a probability of almost 60% that the Federal Reserve will raise interest rates when its meeting concludes on September 16.
The US 10-year Treasury yield rose to 4.79% from 4.78%, remaining near its highest level since 2023.
European markets mixed
European sharemarkets delivered a mixed performance.
The UK’s FTSE 100 fell 0.1% to 10,811.66, while Germany’s DAX was unchanged at 26,007.63. France’s CAC 40 edged 0.1% higher to 8,317.98.
Higher oil prices continued to support energy stocks but placed pressure on other sectors sensitive to inflation and borrowing costs.
Asian markets mostly lower
Asian sharemarkets were mostly weaker.
Japan’s Nikkei dropped 1.7% to 65,269.33 as a strengthening yen weighed on exporters. Expectations are increasing that the Bank of Japan could raise interest rates at its meeting next week.
Hong Kong’s Hang Seng Index fell 0.4% to 25,317.18 and India’s BSE Sensex declined 0.7% to 75,577.58.
Mainland Chinese markets were mixed. The Shanghai Composite gained 0.2% to 3,940.55, while the Shenzhen Composite eased 0.1% to 2,526.93.
China reported that exports surged 25% from a year earlier in August, supported by strong international demand for vehicles and high-technology products.
Australian dollar holds above US72 cents
The Australian dollar was trading around US72.22 cents, remaining firm despite weaker global equity markets.
The currency continues to receive support from rising copper prices and expectations that Australian interest rates will remain elevated.
Oil rises as conflict threatens supplies
Brent crude settled 0.9% higher at US$97.92 a barrel after reaching US$99.46 during the session.
West Texas Intermediate climbed 3.32% to US$91.22 a barrel.
Oil has risen sharply from around US$72 in early July as renewed fighting between the US and Iran constricts supplies from the Middle East.
The market remains focused on disruptions to shipping through the Strait of Hormuz and the risk that attacks could spread to additional energy infrastructure.
Copper surges while gold slips
- Copper jumped 2.42% to US$6.581 a pound, strengthening the outlook for Australian copper producers and explorers.
- Iron ore gained 0.45% to US$99.57 a tonne, while silver advanced 0.57% to US$65.48 an ounce.
- Gold fell 0.56% to US$4,429.80 an ounce as rising bond yields and expectations of higher US interest rates reduced demand for the non-yielding metal.
- Palladium declined 2.68% to US$1,400 an ounce and platinum eased 0.31% to US$1,828.50.
What to watch
Oil prices and Middle East developments will remain central to Wednesday’s market direction, alongside the expected recovery in Australian mining and energy stocks.
Investors will also prepare for Thursday’s US producer-price report and Friday’s consumer inflation figures, which could determine whether the Federal Reserve raises interest rates next week.
