Staff reporters
Shaky trading in global markets after escalating strikes in the war with Iran and a spike in oil prices are expected to further rattle Australia’s sharemarket when it opens.
Oil prices rose, and worldwide sharemarkets fell on Wednesday after President Donald Trump raised doubts about the temporary truce with Iran. The uncertainty put early pressure on local stocks before they staged a dramatic turnaround and finished only modestly lower on Wednesday.
But futures at 6am AEST point to a 50 point slide, or 0.57 per cent fall, on the benchmark S&P/ASX200 index when it opens on Thursday. The dollar was buying US69.38¢, up from US69.32¢ at 6am the day before.
Telstra was urgently investigating a second network fault on Wednesday night that was stopping some calls from connecting, including to Triple Zero, hours after the telco said it had resolved the outage that crippled its mobile services for much of Wednesday. The company lost 3 per cent to a nearly five-month low of $4.92 on Wednesday as it grappled the massive outage.
On Wall Street, the S&P 500 fell 0.3 per cent Wednesday after sinking as much as 1.1 per cent earlier in the day. The Dow Jones Industrial Average dropped 1.1 per cent after Trump said the agreement to pause fighting was over. The Nasdaq composite erased an early slump and rose 0.2 per cent after Trump said in the afternoon that the most recent fighting did not mean a return to full-scale war.
The action was stronger in the oil market, where the price for a barrel of Brent crude climbed 6.12 per cent to $78.70 and briefly topped $80. That’s still below its peak from earlier in the war, when the price for the most actively traded contract reached nearly $120. But the jump is unsettling because oil prices had just dropped back to where they were before the war.
The worry is that a continuation of the war will block the Strait of Hormuz and prevent the delivery of crude from the Persian Gulf to customers worldwide. That could worsen inflation, which economists expected would ease with oil prices, and in turn force the Federal Reserve and other central banks to raise interest rates.
Higher rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments.
Losses for stock markets in Europe accelerated, and oil prices climbed immediately after Trump said, “For me, I think it’s over” about the status of the ceasefire. He added that US representatives can continue negotiations, “but I think they’re wasting their time.”
In the US, stocks of companies in the housing industry helped lead the way lower. They were hurt by worries that rising Treasury yields in the bond market will mean higher rates for mortgages and chill the industry. As a result, builders and companies with big fuel bills sank.
Helping to offset those losses was a steadying for some influential stocks in the artificial-intelligence industry. They’ve been under pressure in recent weeks on worries that their prices shot too high and that AI may not produce enough productivity and profits to make all the investments in chips and data centres worth it.
Their swings carry a lot of weight on Wall Street because AI stocks have grown into some of the US market’s biggest, giving their movements more effect on the S&P 500 than other stocks.
In the bond market, Treasury yields rose with the price of oil. The yield on the 10-year Treasury briefly got near 4.60 per cent before pulling back to 4.56 per cent. That’s up from 4.55 per cent late Tuesday and from just 3.97 per cent before the war with Iran began.
In sharemarkets abroad, European markets turned sharply lower after Trump made his comments, and Germany’s DAX lost 2.23 per cent.
In Asia, South Korea’s Kospi dropped 5.3 per cent and continued its sharp swings amid seesawing worries and euphoria about the AI stocks that dominate its market.
Hong Kong’s Hang Seng index was an outlier and rose 3 per cent.
Shares that trade in Hong Kong of Chinese AI startup Zhipu, known also as Z.ai and traded as Knowledge Atlas Technology, jumped 13.4 per cent.
A six-month lock-up period for “cornerstone” investors following its January trading debut in Hong Kong expires this week. China National Radio reported late Tuesday that nearly 70 per cent of Zhipu’s cornerstone investors are committed to stay on, despite previous worries that the lock-up period expiration could trigger a sell-off.
Zhipu’s share price has risen more than 1300 per cent since its debut.
With AP
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