United States
Wall Street staged a solid rebound overnight as strong economic data helped investors look past the escalating conflict in the Middle East, at least for now.
The S&P 500 climbed 1% while the tech-heavy Nasdaq 100 surged 1.8%, powered by a rally in megacap technology names. The Dow Jones Industrial Average added 0.6%. Amazon and Tesla each gained at least 3.5%, pacing five of the magnificent seven stocks higher, though Alphabet and Apple slipped.
The catalyst was a pair of encouraging reports on the US economy. Private payrolls increased by the most in seven months, according to the ADP national employment report, while the ISM services index jumped to its highest reading since mid-2022. A price index within the services data also fell to an almost one-year low, offering a welcome signal on the inflation front.
The data provided a counterweight to what has been a turbulent stretch driven by the war in Iran, which has drawn in about a dozen nations and sparked sharp moves across asset classes. The VIX eased more than three points to 20.54, suggesting some of the acute fear is fading, though uncertainty remains elevated.
On the corporate front, Broadcom was 2.1% higher ahead of its quarterly results after the closing bell. The chipmaker’s numbers are being closely watched as the latest test of the artificial intelligence spending narrative. Elsewhere, Intel’s chief financial officer flagged ongoing strength in server demand amid a supply shortage, while Apple rolled out a new $599 MacBook aimed at the budget end of the laptop market.
Treasury Secretary Scott Bessent added a fresh wrinkle to the geopolitical picture, indicating a proposed 15% global tariff could take effect as soon as this week.
Europe
European equities posted their strongest session since November as hopes for a potential off-ramp in the Iran conflict lifted sentiment.
The Stoxx Europe 600 jumped 1.4% after the New York Times reported that Iran had made indirect contact with the US to negotiate an end to hostilities, though Tehran denied the report. US Defence Secretary Pete Hegseth said he expected control of Iranian skies within a week.
Travel, technology and banking stocks led the charge higher, while chemicals, food and energy shares lagged. The rally came despite the broader European benchmark still tracking towards its worst weekly decline since April, reflecting the damage inflicted since the war began five days ago.
Among individual movers, semiconductor equipment maker ASM International rallied 5% after fourth-quarter orders topped expectations, reinforcing confidence in the AI-driven demand cycle for chipmakers. Insurer Scor climbed 2.6% on a better-than-expected profit result.
The relatively measured reaction on Wall Street also helped steady European nerves, though some market participants cautioned the bounce may prove fragile given the options-driven dynamics at play.
Australia
After a bruising session on Wednesday that wiped $63 billion from the ASX’s market capitalisation, Australian futures are pointing to a meaningful bounce on Thursday.
S&P/ASX 200 futures were up 91 points, or 1%, to 8,949 near 7am AEDT, tracking the overnight recovery on Wall Street. The benchmark had plunged 176.1 points, or 1.9%, to 8,901.2 on Wednesday in its second-biggest drop since April as the widening Middle East war sent investors scrambling out of risk assets.
All 11 industry groups finished in the red on Wednesday, led lower by materials, banks and rate-sensitive property stocks. Higher oil prices and their potential to reignite inflation weighed heavily, with bond traders dialling back US rate cut bets. Domestically, GDP data showing 2.6% growth in the fourth quarter exceeded forecasts, prompting money markets to price in a 33% chance of another rate increase from the Reserve Bank later this month.
The gold miners were hammered despite the precious metal recovering 1.5% to $US5,164, with Newmont finishing down 6.3%, Westgold Resources losing 7.1% and West African Resources falling 7.4%. Iron ore’s slide below $US100 a tonne dragged BHP down 3.5%, Fortescue 3% and Rio Tinto 1.6%.
In corporate news, Endeavour Group dropped 3.5% after reporting a 17% fall in half-year net profit to $298 million, with its interim dividend of 10.8 cents coming in below expectations. Treasury Wine Estates lost 6% after announcing the retirement of its chief financial and strategy officer, Stuart Boxer.
On Thursday’s agenda, January trade balance and monthly household spending data drops at 11.30am. NAB expects a 0.4% month-on-month rise in household spending, marking a return to more trend-like growth after a stronger fourth quarter.
Commodities and currencies
Oil prices remained elevated but steadied slightly, with Brent crude dipping 0.1% to $US81.32 a barrel and West Texas Intermediate easing 0.1% to $US74.45 in a volatile session. The US said it would escort oil tankers through the Strait of Hormuz, helping ease some supply disruption fears.
Gold extended its run, rising 0.9% to $US5,133 an ounce as investors continued to seek safe-haven protection.
Iron ore slipped 0.4% to $US98.65 a tonne, extending its decline below the key $US100 level.
The Australian dollar firmed 0.7% to 70.83 US cents as the greenback weakened broadly. The euro edged up 0.1% to $US1.1627 and the Japanese yen gained 0.4% to 157.10 per dollar.
Bitcoin surged 8.4% to $US73,734 while ethereum rallied 11%.
Economic Calendar
AU:
- Trade Balance 11:30
EU:
- Retail Sales 21:00
US:
- Initial Jobless Claims 00:30
- Retail Sales 00:30
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
