United States
It was another punishing session on Wall Street as the escalating US-Israel war against Iran sent oil prices surging past the US$100 mark and fresh cracks in the private credit market added to the selling pressure.
The S&P 500 tumbled 1.5% to 6,672, its lowest level since November, while the Dow Jones Industrial Average shed 1.6% to 46,679. The tech-heavy Nasdaq Composite fared worst, dropping 1.8% as megacap stocks edged closer to correction territory.
The war dominated proceedings. Both President Trump and Iran’s new supreme leader Mojtaba Khamenei struck defiant tones on the 13th day of the conflict, offering little comfort to investors hoping for a de-escalation. Khamenei vowed to keep the Strait of Hormuz effectively closed, while Trump suggested preventing Iran from obtaining nuclear weapons was more important to him than the price of oil.
Adding to the unease, the US$1.8 trillion private credit market showed worrying signs of stress. Redemption requests from private credit funds forced Morgan Stanley and Cliffwater to cap investor withdrawals, while Deutsche Bank flagged a US$30 billion exposure to the sector. Banks bore the brunt of the selling, dragging the broader market lower.
Trump also weighed in on monetary policy, posting that Federal Reserve chair Jerome Powell should be cutting interest rates immediately rather than waiting for next week’s meeting. The Fed is widely expected to hold rates steady when it meets on March 17 and 18, with traders now pricing in barely a single quarter-point cut for the remainder of the year. Wells Fargo warned that rising stagflation risks are putting the Fed’s dual mandate in tension, with new economic projections likely to shift in a stagflationary direction.
On the corporate front, energy producers rallied while fertiliser stocks surged as Strait of Hormuz disruptions tightened supply. Airlines sank on concerns about higher fuel costs. After hours, Adobe delivered a tepid outlook and announced its chief executive would resign. Bumble soared after unveiling an AI-powered matchmaking assistant, while Tesla received clearance to convert its xAI investment into a small SpaceX stake ahead of a planned listing.
Europe
European equities extended their losses as the Middle East conflict and private credit jitters weighed heavily, with the Stoxx 600 falling 0.6%.
Banks were the worst-performing sector by a wide margin, tumbling 3.5%. HSBC dropped 6%, Deutsche Bank shed 5.3% and Barclays fell 5.1% as concerns about private credit exposure rattled investor confidence. Travel stocks also suffered, losing 1.9% as higher oil prices clouded the outlook for airlines and leisure companies. EasyJet slid 4.2%, while Swedish outdoor products maker Dometic crashed 19% to a record low after withdrawing its dividend on geopolitical concerns.
On the winning side, chemicals led the charge with a 2.8% gain, fuelled by strong earnings from fertiliser group K+S, which jumped 15%. Utilities added 1.8%, with RWE climbing 3.8% after delivering upbeat earnings and dividend growth guidance. Energy stocks gained 1.4% as the oil rally lifted producers including Equinor and BP.
Among individual movers, Italian defence group Leonardo surged 5.7% on bullish 2030 targets, Zalando rallied 9.5% after a profit beat and buyback announcement, and Accelleron Industries jumped nearly 12% following earnings and its first-ever share buyback program. Construction stocks fell 1.7% after reports the EU was weighing looser carbon rules, dragging cement names like Heidelberg Materials and Holcim lower.
Australia
Australian shares are set for a weaker start to Friday’s session, with ASX 200 futures down 28 points, or 0.3%, to 8,592 near 7am AEDT. The fair value calculation suggests an early loss closer to 0.5%.
The major miners look set for a mixed day. BHP’s American depositary receipts fell 3.5% overnight, while Rio Tinto’s ADRs declined 1.5%. Iron ore’s 4.3% surge to US$108.60 a tonne may provide some offset, with reports of Chinese steel mills rushing to secure BHP cargoes amid fears of further trade curbs.
Interest rate expectations are front and centre. Morgans chief economist Michael Knox forecast the RBA will lift the cash rate to 4.6% by year end, implying three more hikes, driven by rising energy costs, government stimulus and a tight labour market. Bond yields moved sharply higher, with the three-year climbing 8.3 basis points to 4.55% and the ten-year jumping 10 basis points to 4.95%.
Syrah Resources faces a tough session after the US International Trade Commission rejected tariffs on Chinese graphite anode materials, overturning duties of between 160% and 170% that would have supported the company’s Louisiana production facility. Elsewhere, Collins Foods agreed to an up to $9 million class action settlement over rest break disputes, Westgold completed the sale of its Reedy and Comet gold projects to Valiant Gold ahead of its planned ASX listing, and Cobram Estate cleared US antitrust approval for its California Olive Ranch acquisition.
Broker activity included Morgans upgrading Dalrymple Bay and Magellan Financial to buy ratings, JPMorgan lifting Liontown to overweight, and Barrenjoey initiating Generation Development Group at overweight.
Commodities and Currencies
Oil stole the show. Brent crude settled above US$100 a barrel for the first time since August 2022, surging more than 10% to US$101.35 as the blockage of the Strait of Hormuz continued to choke global supply. West Texas Intermediate climbed nearly 10% to settle at US$95.73. The International Energy Agency described the disruption as the largest in the history of the global oil market, estimating 8 million barrels a day have been taken offline this month. Goldman Sachs warned prices could exceed the 2008 peak of US$147.50 if flows through Hormuz remain depressed through March.
Gold fell 1.7% to US$5,086.90 an ounce as the surging dollar and fading rate-cut expectations took the shine off the precious metal. Iron ore bucked the trend, rallying 4.3% to US$108.60 a tonne amid rising trade uncertainty and cargo diversions related to the conflict.
The Australian dollar dropped 1% to 70.78 US cents as the greenback surged to an almost two-month high. State Street reported institutional dollar buying at its strongest level in nearly two years. The euro slipped 0.4% to US$1.1516, while the Japanese yen weakened 0.3% to 159.38 per dollar.
Economic Calendar
US:
- Personal Income Jan 23:30
- Personal Spending Jan 23:30
- Durable Goods Orders Jan 23:30
- Uni. of Michigan Sentiment Mar 01:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
