The ASX is set to fall this morning as Middle East tension impacts markets. ASX 200 futures are down 0.6% to 7,772 points.
Wall St closed in the red ahead of Iran’s attack on Israel while the global benchmark Brent crude jumped to near $US90.15 per barrel and the US WTI near $85.45 per barrel.
Speculation now is that rising sanctions against Iran may send the price of Brent closer to the $US100 per barrel mark – for the first time since mid-2022.
Investors are now fearful that inflationary pressures will cause various central banks to rethink their rate decisions.
The semi-silver lining may come in the way Iran carried out the attack, which some analysts say may reduce risk.
“While the drone attack has grabbed headlines, its immediate impact on global markets, particularly oil prices and inflation concerns, may be subdued,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note Sunday.
“The precision and limited lethal impact of Iran’s response suggest a strategic approach aimed at minimising damage rather than escalating tensions. As a result, the ripple effects on the oil market, a key determinant of global inflation dynamics, are expected to be somewhat muted.”
Innes did note that “the situation remains fluid and headline risk will likely dominate for a while.”
ASX finished higher last week
The ASX200 finished 0.19% higher last week at 7.788. Investors rotated out of the ASX200 Financial sector and into the Materials sector.
The Utilities was 2.83% higher, Materials gained 2.78%, and Industrial was up 1.23%. In contrast, Real Estate dropped 2.14%, Consumer Staples lost 1.27%, Energy dropped 1.16%) and Financial dragged 0.788.
“The highlight of this week’s data calendar will be Thursday's Labour Force report. This month (March), the market expects the economy to lose 40,000 jobs and for the unemployment rate to rebound to 4% from 3.7%,” IG Markets analyst Tony Sycamore said.
Sycamore believes the RBA is still on track to drop rates.
“As the seasonal noise around the holiday period begins to subside, we expect to see further evidence of cooling within the labour market and reiterate our call for the RBA to cut rates by 25bp in August before a second cut in November, which will see the cash rate end the year at 3.85%.”
Global markets
(source Commsec)
US share markets fell on Friday after major US banks' results failed to impress. Equities were also roiled by news reports that Israel was bracing for an attack by Iran on government targets.
JPMorgan Chase (NYSE:JPM), the biggest US bank by assets, posted a 6% profit increase but its net interest income forecast fell short of expectations. Its shares slid 6.5%. Wells Fargo (NYSE:WFC) dipped 0.4% after profits fell 7% as net interest income dropped on weak borrowing demand. Citigroup posted a loss after spending on employee severance and deposit insurance. Its stock slipped 1.7%.
- The Dow Jones index fell by 476 points or 1.2%.
- The S&P 500 index lost 1.5%.
- The Nasdaq index shed 267 points or 1.6%.
- The S&P 500 notched its biggest weekly percentage loss since January, down 1.6%, while the Dow's weekly loss of 2.4% was its steepest since March 2023. The tech-heavy Nasdaq was 0.5% lower for the week.
European sharemarkets
Closed slightly higher on Friday as investors digested IK economic data. Britain’s economic output increased by 0.1% in monthly terms during February (survey: +0.1%). European mining stocks were 2.4% higher while autos slipped 1.2%.
- The continent-wide FTSEurofirst 300 index rose by 0.2% but logged its second straight weekly decline, down 0.2%.
- In London, the UK FTSE 100 index gained 0.9% and was up 1.1% for the week.
Currencies
Were mixed against the US dollar in European and US trade.
- The Euro fell from US$1.0708 to US$1.0622 and was near US$1.0640 at the US close.
- The Aussie dollar dipped from US65.26 cents to US64.55 cents and was near US64.65 cents at the US close.
- The Japanese yen rose from 153.37 yen per US dollar to JPY152.60 and was near JPY153.30 at the US close.
Commodities
Global oil prices rose by 0.8% on Friday on geopolitical tensions in the Middle East but posted a weekly loss on a bearish world oil demand growth forecast from the International Energy Agency (IEA) and worries about slower US interest rate cuts.
- The Brent crude price rose US71 cents or 0.8% to US$90.45 a barrel.
- The US Nymex crude price added US64 cents or 0.8% to US$85.66 a barrel.
- For the week, Brent declined 0.8%, while the Nymex fell 1.4%.
Base metal prices climbed on Friday.
- Copper futures rose by 0.1% to their highest since June 2022 on market expectations of a demand upswing. But weaker-than-expected credit data from China capped gains.
- Aluminium futures lifted 1.6%.
- Copper rose 0.4% for the week with aluminium up 1.7%.
- The gold futures price rose US$1.40 or 0.1% to US$2,374.10 an ounce on Friday as growing tensions in the Middle East prompted investor safe-haven demand. Spot gold was trading near US$2,343 an ounce at the US close after hitting a record high of US$2,419.79. Prices were up 1.2% for the week.
- Iron ore futures gained US$1.34 or 1.3% to US$106.05 a tonne on Friday due to a brighter demand outlook in China and improved fundamentals in the near term. Iron ore prices jumped 6.1% over the week.
What about small caps?
The S&P/ASX Small Ordinaries (XSO) gained 0.23% to finish the week on Friday to 3,084.60. It was up 0.48% for the week.
It has been a solid start to the week for small cap news flow. You can read about the following and more throughout the day.