United States
Wall Street retreated overnight as escalating tensions between the US and Iran sent oil prices surging and dampened risk appetite across financial markets. The S&P 500 fell 0.3%, the Dow Jones Industrial Average shed 0.5%, and the Nasdaq 100 slipped 0.4%, with weakness concentrated in financials and technology.
The mood turned cautious after President Donald Trump signalled the next 10 days would be decisive in determining whether the US and Iran could reach a diplomatic agreement over Tehran’s nuclear programme. With the US stationing two aircraft carriers, fighter jets and refuelling tankers across the Middle East, markets are increasingly pricing in the possibility of military action, which would threaten oil flows from a region responsible for roughly a third of global supply.
Investors were also shaken by news that Blue Owl Capital restricted withdrawals from one of its private credit funds, raising fresh concerns about the risks lurking beneath the surface of the $1.8 trillion private credit market. Blue Owl shares plunged around 6%, dragging peers lower with Blackstone off 5.4%, Apollo Global down 5.2%, Ares Capital sliding 2.4% and KKR retreating 1.9%.
Walmart weighed on sentiment after the retail giant delivered a conservative earnings outlook, though its US comparable sales figures beat expectations. Separately, Amazon officially surpassed Walmart as the world’s largest company by revenue, a milestone marking the extraordinary scale the e-commerce and cloud computing giant has built since its origins as an online bookseller in 1994.
Among other corporate developments, OpenAI is reportedly close to finalising the first phase of a new funding round expected to exceed $100 billion, which would represent a record-breaking deal for the artificial intelligence sector. Deere & Co lifted its annual profit outlook, anticipating a long-awaited recovery in agricultural markets, while DoorDash delivered a stronger-than-expected orders outlook for the current quarter.
Traders are now turning attention to Friday’s key US economic readings, including the first estimate of fourth-quarter GDP and the Federal Reserve’s preferred inflation gauge, core PCE. Bank of America is forecasting core PCE rose 0.4% month-on-month in December, which would leave the annual rate elevated at 3%. Weekly jobless claims data provided a mildly encouraging signal, dropping by the most since November in a sign the labour market remains stable.
Europe
European equities pulled back from record highs, with the Stoxx 600 falling 0.5% in its biggest single-day drop since early February. Banks and industrial goods were among the weakest performers, while real estate and food and beverages managed gains.
Airbus was the session’s standout loser, tumbling 6.8% after flagging that unreliable engine supplies are constraining production and delivery schedules for its A320 family of jets. French carmaker Renault fell 3.1% after warning that profitability would decline this year as it rolls out lower-priced electric vehicle models.
Not all news was negative. Nestle jumped 3.9% after its new chief executive said sales growth would likely accelerate this year. Air France-KLM was a standout performer, surging 12% on better-than-expected earnings and an upbeat outlook for North Atlantic routes.
Rio Tinto fell 3.7% on the London exchange after reporting flat full-year profit. While improvements in copper and aluminium offset some headwinds, one-off restructuring charges, US tariffs and weakness in its iron ore division due to softer Chinese demand all weighed on the result.
MSCI Europe companies have on balance delivered fourth-quarter profit growth of 3.6%, well ahead of analyst expectations of 1.3%, suggesting the earnings season has been modestly constructive even as geopolitical uncertainty clouds the outlook.
Australia
Australian shares face a softer open on Friday, with ASX 200 futures pointing 44 points, or 0.5%, lower to 9003 as of 8am AEDT, tracking weakness in New York.
Thursday’s session on the ASX was a strong one, with the S&P/ASX 200 rising 0.9% to 9086.20, finishing just short of its October record close and touching a fresh intraday high of 9118.30 during the session. Energy stocks led the charge as oil prices rose sharply on Iran concerns, with Woodside Energy gaining 4.5%, Santos up 5.6% and Beach Energy advancing 2.7%.
The major banks also had a strong day, buoyed by expectations that rising rate pricing following January’s jobs data would support net interest margins. Westpac rose 2.7%, NAB added 2.4%, ANZ climbed 2.1% and CBA edged 0.7% higher.
Among earnings standouts, Hub24 surged 14.2% after reporting a 70% jump in half-year net profit, while payments company Zip Co crashed 34.4% after its US operations slowed and cash earnings fell short of market expectations. Telstra gained 3.6% after lifting its buyback to $1.25 billion alongside a 9.4% rise in interim net profit.
Friday’s earnings calendar is packed, with results due from ANZ, QBE Insurance, Mineral Resources, Guzman y Gomez, Pilbara Minerals and Newmont among others.
Commodities and currencies
Oil was the session’s defining story. Brent crude jumped 2.2% to $US71.89 a barrel and West Texas Intermediate rose 2.4% to $US66.73, with both benchmarks reaching their highest levels since August on the back of heightened US-Iran tensions.
Gold continued its remarkable run, hovering just shy of the $US5000 an ounce threshold after gaining 0.5% to $US4999.94. Iron ore slipped 0.4% to $US95.35 a tonne.
The Australian dollar edged up 0.2% to US70.59 cents despite the broadly cautious mood, while the euro dipped 0.1% to $US1.1770 and the British pound fell 0.3% to $US1.3460. The Japanese yen slipped 0.2% to 155.08 per dollar.
In crypto markets, Bitcoin gained 1.2% to $US67,113, while Ether advanced 0.5% to $US1,950.
Economic Calendar
AU:
- Purchasing Managers Index 09:00
EU:
- Purchasing Managers Index 20:00
US:
- PCI Inflation 00:30
- GDP 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.
