United States
Wall Street staged one of its most dramatic reversals in months on Tuesday as hopes grew that the 10-day-old conflict in Iran may be approaching a conclusion.
The S&P 500 climbed 0.8%, erasing an intraday loss of more than 1.5% in its sharpest turnaround since April. The Nasdaq Composite rallied 1.4%, led higher by megacap technology names including Alphabet and Nvidia, while the Dow Jones Industrial Average advanced 0.5%, recovering more than 1,100 points from its session low.
The catalyst was President Donald Trump telling CBS News he believes the war is “very complete, pretty much,” adding the military operation was running well ahead of his initial four-to-five-week timeframe. The comments triggered a wave of short covering and dip buying that swept through risk assets in the final hours of trade.
The session underscored just how beholden markets have become to every headline from the Middle East. A conflict that has choked tanker traffic through the Strait of Hormuz and sent crude prices above US$100 earlier in the day left traders navigating wild swings with no clear playbook.
Adding to the sense of cautious relief, Group of Seven finance ministers said they stood ready to take any steps necessary to support global energy supply, including the release of strategic oil reserves, though the group stopped short of committing to action. Trump is also reportedly reviewing options to tame oil prices, including restricting US exports and waiving some federal taxes.
The CBOE Volatility Index fell 4.5 points to 24.99 but remains well above pre-conflict levels. Ten-year Treasury yields declined four basis points to 4.10% after touching as high as 4.21% earlier in the session.
On the corporate front, Apple is reportedly delaying its long-awaited smart home display due to struggles with its artificial intelligence capabilities. Novo Nordisk and Hims & Hers Health struck a deal to sell obesity drugs together, ending months of legal acrimony. Live Nation reached a settlement with federal antitrust authorities, throwing a late twist into the government’s case against the Ticketmaster parent.
Europe
European equities dropped for a third consecutive session as the intensifying Middle East conflict sent energy prices soaring and reignited fears of a fresh inflation shock.
The Stoxx Europe 600 fell 0.6%, posting its biggest weekly decline since April. Miners, real estate, autos, retail and travel stocks led the losses, while the energy sector outperformed as oil majors benefited from surging crude prices. Shell climbed 2.5% and BP added 2.2%.
Airlines were hit hard, with Lufthansa tumbling 6.4% as the prospect of sustained higher fuel costs weighed on the sector. Richemont slipped 3.3% as luxury stocks came under pressure amid concerns about weakening consumer demand.
European natural gas futures surged as much as 30% before trimming gains, compounding worries that the continent faces a repeat of the energy price shock that followed Russia’s invasion of Ukraine in 2022. Brent crude traded as high as US$99 before paring its advance after the G7 statement on strategic reserves.
In company news, Roche fell 2.6% after a study of its experimental breast cancer drug in combination with another treatment failed to meet its primary endpoint.
Australia
Australian shares are poised to rebound sharply on Wednesday, with S&P/ASX 200 futures surging 184 points, or 2.2%, to 8,751 near 7.15am AEDT, tracking Wall Street’s late recovery and Trump’s comments about the Iran conflict winding down.
The bounce comes after Monday’s bruising session, which saw the benchmark plunge 2.9%, or 252 points, to 8,599 in its worst day since the liberation day tariff shock in April. About $90 billion was wiped from the local market as crude prices spiked towards US$120 a barrel, triggering fears of renewed inflation and potential rate hikes.
Energy was the sole bright spot on Monday, with Woodside up 2%, Santos gaining 2.4% and Karoon Energy surging 10.2%. Coal miners also rallied sharply as markets sought alternative energy supplies, with Yancoal climbing 13.3% and Whitehaven Coal adding 4.4%. Santos and Beach Energy confirmed they would proceed with the Moomba Central Optimisation project in South Australia’s Cooper Basin.
Elsewhere, it was a sea of red. BHP slumped 5.1% amid an ongoing stand-off with China, Rio Tinto shed 3.8% and gold miners fell as rising rate expectations weighed on the precious metal. The big four banks all dropped between 1.6% and 2.3%, while interest rate-sensitive names including NextDC, Scentre and Mirvac were punished.
Bond markets repriced aggressively, with the three-year yield jumping to 4.58%, its highest since 2011, while the 10-year yield breached 5%. National Australia Bank told clients it expected headline inflation to peak at 5%.
Looking ahead, Westpac releases its March consumer confidence report at 10.30am, followed by NAB’s February business confidence and conditions data at 11.30am. China’s latest trade figures are also due.
Commodities and currencies
Oil markets delivered their wildest session in years. West Texas Intermediate crude surged above US$119 a barrel before reversing sharply to settle around US$88 after Trump’s ceasefire comments and the G7’s pledge on strategic reserves. Brent crude followed a similar trajectory, trading as high as US$99 before pulling back to US$89.62.
Gold eased 0.6% to US$5,141 an ounce as rising rate expectations offset the traditional safe haven bid. Iron ore firmed 1.2% to US$102.80 a tonne.
The Australian dollar rose 0.5% to US70.65 cents as the greenback weakened broadly following the easing of geopolitical tensions. The euro was little changed at US$1.1614, while the Japanese yen held steady at 157.87 per dollar.
Bitcoin gained 2.8% to US$68,989, with ethereum rising 3.8% to US$2,033.
Economic Calendar
AU:
- Consumer Confidence 10:30
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
