United States
US stocks rallied further on Tuesday, as investors were encouraged by the prospect of a lasting ceasefire between Iran and Israel. Oil prices also dropped sharply, with the Dow Jones Industrial Average gaining over 500 points to close at 43,089, reflecting a 1.19% increase. The tech-heavy Nasdaq Composite added 1.43%, rising by 282 points to finish at 19,912.53. In a broad-based rally, the S&P 500 increased by 67 points (+1.11%) to close at 6,092.18. The S&P is now less than 1% away from the all-time highs set in February this year, before the announcement of tariff introductions.
Fed Chairman Jerome Powell testified before Congress, reaffirming his cautious stance on rate cuts. This contrasts with other Fed officials who have recently suggested that rates may be reduced sooner than anticipated. In other economic news, consumer confidence dropped further in June, according to the Conference Board’s Index released on Tuesday. Consumers expressed concerns about job security and the deteriorating conditions in the labour market. Bond yields were lower, with both the 2-year and 10-year Treasury yields falling by 5 basis points to 3.81% and 4.29%, respectively. The US dollar declined, reversing the recent flight to safety that had driven it higher over the past week. The Bloomberg US Dollar Index fell by 0.55%, settling at recent lows.
In stock news, airline stocks rebounded after the ceasefire announcement from US President Trump, with American Airlines rising by 4.31% and United Airlines adding 2.66%. Cruise line operator Carnival outperformed its peers, announcing second-quarter earnings that exceeded analysts’ expectations. Its shares surged 6.91%, while its competitors rose by 2-4%.
Following the surge in driverless taxi stocks like Tesla the previous day, Uber gained 7.52%, while Alphabet (Google) added 0.96%. The duo’s joint venture, Waymo, which operates robotaxis, began offering rides to the public in Atlanta. Tesla shares pulled back 2.35%, closing at $340.47.
Oil shares fell in tandem with the retreating price of oil, with Chevron dropping 2.25% and Exxon down 3.04%. Solar shares, however, saw a boost after a Senator suggested that proposed reduction in energy rebates in the current tax bill will not be as severe as expected. First Solar gained 4.50%, and Enphase rose 11.05%, recovering a small portion of their recent selloff.
Technology and financials were the best-performing sectors in the S&P on Tuesday, as traders sought riskier assets for their portfolios. Nvidia added 2.59% after its partner ASE, based in Taiwan, suggested that demand for AI chips continues to far outstrip supply. Financial payment firms Visa and Mastercard outperformed the broader financial sector following broker upgrades.
Europe
European shares followed global gains on Tuesday, buoyed by the announcement of a ceasefire in the Middle East. The Euro Stoxx 600 rose by 1.11% to close at 540.98, with most sectors posting solid gains. In the UK, the FTSE 100 remained flat at 8,758.99, held back by declining prices for BP and Shell, which saw their shares drop by 4.77% and 3.71%, respectively, as oil prices fell.
Market trends mirrored those seen elsewhere, with a shift back into travel and leisure stocks, as well as technology and financials, as traders embraced more risk. Gilles Guibout, Head of European Equities, summed up the sentiment, saying, “The resilience of the market is astonishing.”
However, German car parts manufacturer Continental saw a 2.94% decline after issuing a profit downgrade, citing the negative impact of currency fluctuations and increasing trade barriers on its business.
Bond yields rose in Germany, with the 10-year yield climbing 3 basis points to 2.54%. In the UK, yields decreased by 2 basis points, settling at 4.47%. The weakness in the US dollar pushed the EUR/USD higher to 1.1613, while the GBP/USD rose to 1.3621.
Australia
A relief rally took hold in the Australian equity market on Tuesday, fuelled by news of a ceasefire in the Middle East that led to a further decline in oil prices, prompting investors to shift toward risk assets. In a strong rally, the ASX 200 rose by 0.95%, gaining 80 points to close at 8,555.50. Eight sectors posted gains, with materials and financials leading the charge, while energy stocks experienced a sharp decline, falling 3.89%.
By the end of Sydney’s trading session, oil prices had dropped 4.83%, prompting investors to quickly move away from energy stocks. Woodside fell 6.54%, losing $1.89 to close at $24.16, while Beach Energy dropped 2.92%, ending at $1.33. Uranium miners had a mixed performance, following a strong overnight rally in nuclear and uranium-related stocks in the U.S.
The outlook of reduced conflict and diminishing concerns about weakening growth in China led to strong demand for iron ore stocks. BHP gained 2.38%, closing at $36.48, while Fortescue rose by 4.75%, finishing at $15.23. Rio Tinto announced a joint venture with privately owned Hancock Prospecting to develop a $1.6 billion mine in the Pilbara region, named Hope Downs 2. This project is expected to produce 31 million tonnes annually once in production. Rio shares advanced by 3.05%, outperforming the sector to close at $104.94.
The financials sector continued its upward momentum, with CBA setting a record closing at $188.13, up 2.05%. Other banks also saw solid gains of over 2%, with Macquarie Bank notably rising 2.42%, reaching $214.50. ANZ was the underperformer, rising only 1.38%. Brokers have recently downgraded ANZ to “sell” amid concerns about the new CEO’s ability to turn the bank around, with speculation that the bank may need to cut its dividend to preserve capital.
Virgin Australia made its return to the ASX with a partial sell-down by private equity owner Bain Capital. Approximately 30% of the company was sold, with 25% previously sold to Qatar Airlines. The shares were priced at $2.90 and surged after listing, closing at $3.23, an 11% gain. Competitor Qantas also rallied, with shares up 2.38%, closing at $10.32, amid the easing of tensions.
In economic data, the ANZ-Roy Morgan Consumer Confidence Index rose to 86.7 (up from 85.4), with the increase attributed to stronger household spending sentiment. Today’s release of the May CPI data is expected to show an annual rate of 2.3%, down slightly from April’s 2.4%. If the data comes in higher than expected as it did with the April data, traders may revise their expectations for a rate cut at the RBA’s July monetary policy meeting.
Bond yields were lower, with the 10-year yield dropping 6 basis points to 4.15%, and the 2-year yield also decreasing by 6 basis points to 3.21%. The Australian dollar strengthened, trading at 0.6490 against the US dollar. In overnight trade the ASX 200 futures are marginally higher with a 5 point gain (+0.06%) suggesting a flat start to the day.
Commodities
Oil prices fell sharply as tensions in the Middle East eased, reversing most of the risk premium that had been built into the price. Brent Crude dropped by 5.12%, settling at US$67.82, while the West Texas Intermediate contract fell 6.04%, losing US$4.14 to close at US$64.37. Although there are concerns that the ceasefire may not hold, as Israeli and Iranian officials continue to exchange barbs, market focus has shifted back to supply increases announced by OPEC+ earlier this month, following a forecasted rise in oil output from Kazakhstan’s state energy company.
Gold also declined as the flight-to-safety trade reversed. By the end of the session, gold was trading at US$3,323, down 1.33%. Earlier in the session, it had fallen more than 2% before recovering. Silver also saw a drop, trading at US$35.92. Bitcoin remained stable at US$106,087.
Copper held steady at US$9,669 per tonne on the LME, gaining US$2 on the day. Iron ore prices dropped by 2.1%, closing at US$92.90 for the July futures contract in New York. The weakness in the Chinese economy, highlighted by weak production data last week, was a key factor for European traders as the commodity slid.
Economic Calendar
AU:
- Monthly CPI Data (May) – 11.30am
US:
- New Home Sales (May) – 12:00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
