United States
Risk-off sentiment dominated U.S. markets on Tuesday as the ongoing conflict between Israel and Iran intensified with continued airstrikes. Social media posts by U.S. President Donald Trump suggested that a ceasefire may still be some time away, fuelling concerns among investors that deeper U.S. involvement could be on the horizon.
All major indexes closed lower. The Dow Jones Industrial Average fell 299 points (-0.70%) to 42,215, the Nasdaq Composite declined 0.91% to 19,521, and the S&P 500 lost 0.84% to finish at 5,982.72. Energy was the only sector to close higher, while healthcare and consumer discretionary stocks led the declines.
Energy stocks rallied on the back of rising oil prices, with ExxonMobil and Chevron advancing 1.35% and 1.93%, respectively. In contrast, renewable energy stocks were sharply lower after the Senate’s version of the new tax bill proposed phasing out green energy incentives. First Solar plunged 17.9%, and Enphase Energy fell 24%.
Tesla shares dropped 3.88% to close at USD 316.35. The company announced a one-week pause in production of its Cybertruck and Model Y at its Austin facility due to maintenance work—marking the third such shutdown over the past year.
Airline stocks also came under pressure. United Airlines fell 6.18%, Delta Airlines declined 4.33%, and JetBlue Airways lost 7.88% after announcing cost-cutting measures in response to weaker travel demand that may prevent the company from breaking even. The surge in oil prices further weighed on the sector.
Economic data added to investor caution. Retail sales fell 0.9% in May—worse than expected and at odds with earlier consumer sentiment surveys that indicated rising confidence. Attention now turns to the Federal Reserve, which is set to release its interest rate decision today. While markets broadly anticipate no change this month, commentary from the Fed may influence expectations around the two additional rate cuts currently priced in for later this year.
U.S. Treasury yields moved lower. The 10-year yield fell 6 basis points to 4.39%, while the 2-year yield declined 2 basis points to 3.95%.
Europe
European investors were similarly sanguine about the geopolitical outlook and moved shares prices lower. The Euro Stoxx 600 fell 0.85% (-4.65 points) to close at 542, while the UK’s FTSE 100 slipped 0.46% to finish at 8,834. Within Europe, only the energy and real estate sectors managed to post gains, while the remaining nine sectors ended lower, led by financials.
Energy stocks advanced on the back of stronger oil prices. BP rose 1.6%, Shell gained 1.43%, and France’s TotalEnergies climbed 1.8%. TotalEnergies also benefited from news that it had secured a 25-year offshore wind concession in the North Sea from the German government, aimed at adding one gigawatt of renewable energy capacity.
In contrast, travel and airline stocks fell amid expectations of reduced demand and rising input costs.
On the economic front, investor sentiment in Germany showed improvement. The ZEW Investor Morale Index rose sharply in June, beating forecasts. According to the index’s publishers, optimism is being driven by recent fiscal stimulus measures and a more accommodative interest rate environment.
In bond markets, yields were slightly higher. German 10-year bund yields edged up 1 basis point to 2.53%, while UK gilt yields rose 2 basis points to 4.55%.
Australia
Australian investors adopted a cautious approach on Tuesday as continued hostilities between Iran and Israel, along with rising oil prices, weighed on sentiment. With no clear resolution or ceasefire in sight, the ASX 200 remained largely flat for a second consecutive session, closing 7.1 points lower (-0.08%) at 8,541.30. Sector performance was mixed and with marginal movements as seven sectors ended in the red and four posted gains.
In the energy sector, Santos edged up to $7.76 (+0.52%) as markets continued to assess the likelihood of regulatory approval for the Abu Dhabi-led consortium’s bid of US$5.76 per share (A$8.82). Uranium stocks extended their rally on yesterday’s news of investments to purchase physical uranium, with Paladin Energy rising 4.4% to $7.60 and Boss Energy climbing 3.23%.
Within the materials space, iron ore miners BHP and Fortescue recorded slight losses as iron ore prices hit 2-month lows. Gold stocks, however, saw renewed interest as bullion prices stabilised. Newmont advanced 2.49% to $89.29, while Emerald Resources rebounded 3.28% to $4.72.
CSL Limited announced that the U.S. Food and Drug Administration had approved its treatment for hereditary angioedema, a rare genetic disorder. The approval paves the way for commercial sales to begin by the end of June. CSL shares rose 19 cents to close at $239.29.
In fixed income, Australian bond markets were quiet, with yields ticking slightly higher. The 10-year government bond yield rose 2 basis points to 4.25%, while the 2-year yield edged up 1 basis point to 3.31%.
The Australian equity market is expected to open lower today after ASX200 futures slipped 18 points, a drop of 2.1%. The AUDUSD has moved lower overnight from its close in Sydney at 0.653. It begins Wednesday’s trading at 0.6480
Commodities
Oil prices rose on Tuesday as the Middle East conflict escalated, with both sides continuing airstrikes. West Texas Intermediate (WTI) climbed 4.32% to US$74.87, while Brent crude gained 4.22% or US$3.10 to reach US$76.03. Traders expressed little optimism about the prospect of a ceasefire, adding to the upward pressure on prices. Additional support came from reports that two tankers had collided in the Strait of Hormuz. Although there were no injuries or oil spills, concerns were heightened by reports of electronic interference affecting the ships’ navigation systems, raising the risk of future incidents.
Meanwhile, gold prices remained steady at US$3,385 per ounce. Earlier in the session, safe-haven demand pushed gold briefly above US$3,400 before easing back. Silver broke out of recent consolidation, rising 2.22% to US$37.12—its highest level in 14 years.
Bitcoin fell 4% to US$104,627 as investors moved away from risk assets.
Copper edged lower, down 0.35% to US$9,669 per tonne on the London Metal Exchange. While geopolitical tensions raised concerns about future demand, declining stockpiles in London continued to support prices. Investors are also watching for a U.S. government-commissioned report on tariffs due in mid-July, with speculation mounting that a 25% tariff on US imports will be applied from that time.
Iron ore slipped 1.28% over the past 24 hours to close at US$92.30.
Economic Calendar
AU:
- Westpac Leading Index (May) – 11.00am
US:
- Housing Starts and Building Permits (May) – 10:30pm
- Fed Interest Rate Decision – 4:00am
- Fed Press Conference -4:30am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
