United States
Wall Street staged a late-session recovery on Monday but still finished in the red as the escalating conflict between the US-Israel alliance and Iran injected a fresh wave of uncertainty across global markets.
The S&P 500 clawed back from losses exceeding 1 per cent to finish broadly flat, while the Dow Jones Industrial Average slipped 0.2 per cent. The Nasdaq 100 was also little changed as bargain hunters stepped in to support several technology names with strong balance sheets.
Energy and defence stocks were the clear winners as oil surged on fears the near-halt of shipping through the Strait of Hormuz could trigger prolonged supply disruptions. Airlines were hammered, with the sector among the worst performers as Middle East aviation routes remained heavily disrupted.
The conflict overshadowed fresh economic data showing US manufacturing expanded, though rising input prices added to inflation concerns. The yield on 10-year Treasuries climbed 11 basis points to 4.05 per cent in what was shaping up as the biggest daily advance since April. Traders are now fully pricing the first Federal Reserve rate cut for September, with expectations for a third reduction this year all but evaporating.
On the corporate front, Nvidia agreed to invest $US4 billion in two data centre optics companies essential for artificial intelligence infrastructure, while Apple unveiled the iPhone 17e and a faster iPad Air. Paramount Skydance announced plans to combine Paramount+ and HBO Max into a single streaming platform following its $US110 billion acquisition of Warner Bros. Discovery. BlackRock’s Global Infrastructure Partners and EQT agreed to acquire power plant developer AES Corp for roughly $US10.7 billion in cash, underscoring the surging demand for electricity to fuel AI data centres.
Europe
European equities suffered their steepest sell-off since November as the Middle East conflict triggered a broad retreat from riskier assets.
The Stoxx Europe 600 dropped 1.6 per cent at the close, with sharp divergence across sectors. Energy was the standout gainer after oil prices posted their largest jump in four years and European natural gas prices surged more than 50 per cent following the shutdown of Qatar’s major LNG export facility. Shell and TotalEnergies both advanced more than 2 per cent.
Automotive stocks bore the brunt of the selling as higher energy costs weighed on the sector. Travel and leisure shares also underperformed significantly, with Lufthansa tumbling 5.2 per cent and Air France-KLM plunging 9.4 per cent as disruptions to Middle Eastern aviation hubs intensified.
The FTSE 100 fared better than its continental peers, falling 1.2 per cent, with its heavier weighting towards defensive sectors and energy providing a buffer. Citi strategists upgraded UK equities to overweight, arguing British stocks offer an effective hedge against renewed geopolitical turmoil. European credit risk gauges also widened on the session.
The sell-off came after the Stoxx 600 had ended the prior week at an all-time high, buoyed by investors diversifying away from US technology amid growing unease around artificial intelligence valuations.
Australia
The local market defied the global gloom on Monday, with the S&P/ASX 200 adding 2.3 points to close at a fresh record of 9200.90, its fourth consecutive all-time high. Five of the benchmark’s 11 sectors finished higher as surging commodity prices more than offset weakness in financials and technology.
Energy was the star performer, rallying nearly 5 per cent on the back of the oil price spike. Woodside surged 6.8 per cent to $30.24, Santos gained 6.7 per cent to $7.21 and Karoon Energy rocketed 15.2 per cent to $1.78. The flight to gold also lifted miners, with Newmont jumping 5.7 per cent, Resolute Mining surging 10.4 per cent and Genesis Minerals climbing 8.5 per cent.
Counter-drone specialist DroneShield rallied 6.6 per cent, while Qantas dropped 5.4 per cent as the conflict disrupted international flight paths. Financials were the primary drag, with the big four banks all finishing lower following a slump in US financial stocks late last week. National Australia Bank led losses with a 2.9 per cent decline, while Commonwealth Bank eased 0.7 per cent.
Technology selling resumed, with WiseTech Global falling 4.7 per cent, Xero dropping 3.8 per cent and NextDC losing 3.8 per cent. In corporate news, Magellan Financial remained in a trading halt after launching an equity raising to fund its $1.6 billion merger with Barrenjoey Capital Partners. Lynas Rare Earths gained 5.4 per cent after Malaysia’s atomic energy regulator renewed its operating licence for a decade.
Looking ahead, ASX 200 futures were pointing to a softer open on Tuesday, down 19 points or 0.2 per cent to 9138. The RBA’s Michele Bullock delivers a keynote at the Australian Financial Review Business Summit on Tuesday morning, while fourth-quarter GDP lands on Thursday alongside China’s National People’s Congress.
Commodities and currencies
Oil prices surged as the conflict threatened to choke off shipments through the Strait of Hormuz. West Texas Intermediate crude jumped 7.5 per cent to $US72.03 a barrel after earlier touching $US82 in Asian trading, while Brent crude settled 8.3 per cent higher at $US78.90.
Gold climbed 1.1 per cent to $US5,339 an ounce, extending its remarkable run as investors sought haven assets. Iron ore edged 0.8 per cent higher to $US99.10 a tonne.
The Australian dollar weakened 0.5 per cent to 70.82 US cents as the greenback strengthened broadly. The euro fell 1 per cent to $US1.1689, while the Japanese yen dropped 0.8 per cent to 157.37 per dollar. Bitcoin rallied 5 per cent to $US68,938, with ethereum gaining 5.6 per cent.
Economic Calendar
EU:
- Inflation 21:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
