Source : the age
The Australian sharemarket reversed early losses to close in the green, as oil prices headed for the longest losing run in 10 months on expectations that a US-Iran deal to reopen the Strait of Hormuz will unleash a wave of supply, easing the energy crunch that has throttled global growth.
While energy shares slumped amid the deepening oil sell-off, gold miners extended their relief rally. ARN News shares skyrocketed after the embattled media company settled a legal fight with high-profile shock jock Kyle Sandilands for a fraction of the $85 million he had sought.
Having swung between small gains and losses in early trade, the S&P/ASX 200 finished up 48.60 points, or 0.5 per cent, at 8966.30, with eight of its 11 industry sectors in the green. The bourse had trod water on Tuesday as investors paused after the initial rally over the US-Iran peace agreement, and parsed the Reserve Bank’s decision to keep interest rates on hold. The Australian dollar was trading at US70.56¢.
Global benchmark Brent crude retreated for a fifth day to below $US79 a barrel, trading near a three-month low, while West Texas Intermediate was near $US76. The interim pact, which is due to be signed on Friday, offers Tehran broad financial incentives, including the right to sell its oil immediately.
“Most traders still believe US naval operations will likely be escorting for the first few weeks, and mine-sweeping ships will also be present, which will slow the flow of traffic,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. “Still, the futures market is always looking in the distance, and for now the odds are increasing that oil will be moving.”
Oil and gas giant Woodside slumped 3.6 per cent, while its rival Santos dropped 1.2 per cent. Refiner Ampol lost 1 per cent. Coal miners, having benefited as the oil crunch was seen to boost demand for coal, also declined. Yancoal was down 3.8 per cent and Whitehaven Coal down 2.2 per cent.
Tech stocks reversed early losses and advanced, with WiseTech jumping 4.1 per cent. Xero rose 3.5 per cent, NextDC climbed 0.8 per cent and Technology One rose 1.3 per cent.
Anticipating the war’s end will kickstart an economic rebound and boost company profits, some investors shifted out of defensive stocks, weighing on sectors such as consumer staples and utilities. Supermarket chains Woolworths and Coles both fell 1.3 per cent after their rally last week. Power companies Origin and AGL were down 0.7 per cent and 1.6 per cent.
But the heavyweight financial and mining sectors, which together make up more than half of the ASX, were mostly in the green. Gold miners continued their rally, pushing Northern Star Resources up 2.6 per cent, Evolution Mining up 2.9 per cent and Newmont up 2.7 per cent. BHP added 0.6 per cent, hitting a fresh record, although Rio Tinto and Fortescue gave back 1 per cent and 1.1 per cent.
The big four banks were mixed, with CBA up 1.1 per cent and ANZ Bank up 0.7 per cent, but Westpac and National Australia Bank down 0.5 per cent and 0.6 per cent respectively. Macquarie rose 1.2 per cent to $251.93, topping $250 for the first time.
ARN Media soared 31 per cent after Kyle Sandilands reached a $12 million settlement with the KIIS FM radio network owner as part of a deal that brings to an end one of two high-profile, messy legal battles. That amount is far less than the $85 million Sandilands had sought from the radio network for taking him off the air, which bodes well for unresolved parallel litigation launched by his former co-host Jackie “O” Henderson. The pair had been employed on contracts worth $200 million over a decade.
Flight Centre shares jumped 5.3 per cent after the travel agent sweetened a profit warning with the announcement of a buyback of up to $200 million worth of its shares to show “its strong belief in Flight Centre’s recovery and outlook”.
The company now expects underlying full-year profit before tax of $275 million to $295 million, down from a previous forecast of $310 million to $345 million due to cancellations and weaker long-haul bookings because of the Iran war. The “peace agreement reached this week provides a clearer runway” into the financial year starting on July 1, but has come too late to lift this year’s results, it said.
Travel stocks also benefited as the federal government lowered its travel warnings for the key Middle East hubs of Dubai, Doha and Abu Dhabi. Virgin Australia, which has resumed its daily flights with code-share partner Qatar Airways, rose 1.4 per cent. Web Travel soared 11 per cent.
On Wall Street overnight, the S&P 500 slipped 0.6 per cent and pulled up 1.3 per cent below its record set earlier this month, after a patchy session that saw investors rotate out of technology shares and position themselves for the first Federal Reserve interest rate decision under new chairman Kevin Warsh. The Dow Jones Industrial Average added 0.6 per cent to set a record on consecutive days. But drops for some key tech stocks pulled the Nasdaq down 1.2 per cent.
Stocks that had benefited from the boom in artificial-intelligence technology weighed on the market in particular following vicious swings over the past couple of weeks.
These stocks have been leading the market up and down amid worries that their prices shot too high in the AI hype That’s taken a toll because chip companies, makers of computer memory and other AI winners have grown so massive that they have become some of Wall Street’s most influential stocks.
Drops of 2.4 per cent for Nvidia, 4.4 per cent for Broadcom and 6.2 per cent for Micron Technology were the heaviest weights pulling the S&P 500 lower.
On the winning side of Wall Street was SpaceX, which rose 4.8 per cent for its third straight gain since its debut on the US stock market. The mega-cap, which is now bigger than Jeff Bezos’ Amazon, said it was moving forward with a purchase of Cursor, a popular AI coding assistant, valuing it at $US60 billion ($84.9 billion).
Yum Brands climbed 1.9 per cent after it said it was selling the Pizza Hut chain for $US2.7 billion. Most of the restaurants will go to LongRange Capital, a private equity firm.
In other international markets, indexes rose in Europe following a mixed performance in Asia.
The Fed began its own meeting on what to do with interest rates on Tuesday, with an announcement on the decision scheduled for Wednesday [early Thursday AEST].
It’s the first meeting under Warsh. He was nominated by President Donald Trump, who has been pushing for lower interest rates – which would give the economy a boost but also threaten to worsen inflation. The widespread expectation, though, is that the Fed will leave its main interest rate alone again.
In the bond market, the yield on the 10-year Treasury fell to 4.43 per cent from 4.47 per cent late on Monday and from 4.56 per cent earlier this month.
High yields in bond markets worldwide caused by expensive oil prices have threatened to slow economies and undercut prices for all manner of investments, including stocks and cryptocurrencies.
High yields have already sent mortgage rates higher, and a report on Tuesday said construction crews broke ground on far fewer new US homes in May than economists expected.
