The ASX is set to open higher today, extending three consecutive sessions of growth, following a strong day’s trade on Wall Street.
ASX futures were up 28 points, or 0.4%, to 7,030 early this morning and the Aussie dollar was 0.4% higher – back over 64 US cents.
On Wall Street, the Dow was up 0.6%, as was the S&P, while the Nasdaq added 0.4%.
Spoils of war
Fuel prices are expected to spike as global concerns spread in the wake of the growing crisis in the Middle East. Israel has vowed to respond to the weekend’s violence with force, including a potential ground offensive, and has already placed a food, water and power blockade on Gaza.
As a consequence of this uncertainty, energy stocks continued to rally. Shares in Exxon (NYSE:XOM) and Chevron (NYSE:CVX) climbed on Wall Street, 3.5% and 2.8% respectively, while Brent crude rose $US3.50 to $US88.07 per barrel and WTI was up $US3.52 to $US86.31 a barrel.
Defence companies Northrop Grumman (NYSE:NYSE:NOC), General Dynamics (NYSE:NYSE:GD), L3Harris and Lockheed Martin (NYSE:NYSE:LMT) rose between 8.4% and 11.4%, while the broader S&P 500 Aerospace & Defence index jumped 5.6%.
On the other hand, commercial airlines’ shares were down more than 4% after United Airlines, Delta Air Lines (NYSE:NYSE:DAL) and American Airlines (NASDAQ:AAL) suspended flights to Tel Aviv on the back of fuel price concerns.
European airline stocks, including British Airways owner IAG (LON:ICAG), Air France KLM and Lufthansa, were also down between 4% and 8.5%.
The high energy prices will likely have a knock-on effect here in Australia, putting continued pressure on inflation, which in turn will complicate the decisions of the RBA on future interest rates – a lose-lose situation.
European markets shared the stress of the ominous global situation. Travel and leisure stocks were down 2.4%. Shares of UK and Israel-listed oil producer Energean slumped 17.6%, making it the biggest loser in European indices. The continent-wide FTSEurofirst 300 index fell 0.2%. In London, while the UK FTSE 100 index was flat, energy shares were up 2.6%.
In a glimmer of positive news, remarks from US Federal Reserve officials lifted sentiment that the Fed will refrain from lifting interest rates later this year. Dallas Fed President Lorie Logan said the recent surge in bond rates may mean a reduced motive for the US central bank to tighten again.
Currencies, crude and commodities
Currencies were mixed against the US dollar in European and US markets. The Euro advanced to near US$1.0570 at the US close, up from US$1.0519. The Australian dollar also gained, rising from 63.44 US cents to around 64.10 US cents by the US close. Meanwhile, the Japanese yen strengthened to approximately JPY148.50 from 149.21 yen per US dollar.
As mentioned, Global oil prices surged on Monday, driven by escalating military conflict between Israel and Hamas, sparking concerns over Middle East oil supply. Brent crude increased by US$3.57, or 4.2%, to settle at US$88.15 a barrel, while US Nymex crude jumped by US$3.59, or 4.3%, to US$86.38 a barrel. Both benchmarks experienced spikes exceeding US$4 or over 5% during the session.
Base metals displayed mixed trends; copper futures climbed by 0.5% as Chinese demand resumed following a week-long holiday. But gains remained limited due to weak demand in China, a strong US dollar, and rising inventories.
Aluminium futures dropped by 0.1%. In contrast, gold futures increased by US$19.10 or 1% to US$1,864.30 an ounce amid political instability in the Middle East, with spot gold near US$1,862 an ounce at the US close.
Iron ore futures edged up by US44 cents or 0.4% to US$118.18 a tonne, following Rio Tinto (ASX:RIO)'s announcement of anticipated higher Pilbara iron ore shipments for 2024 due to improved operating conditions.
What’s happening in small caps?
The S&P/ASX Small Ordinaries closed at 2,649.79 yesterday, up 0.42% on the previous day.
Making news this morning, which you can read more about throughout the day with Proactive are: