Source : THE AGE NEWS
The market rollercoaster continues, with the Australian sharemarket suffering a broad sell-off again as oil prices pushed past $US100 a barrel, despite a move from wealthy nations to release the largest volume of emergency oil reserves in history to battle the fuel price shock from the Iran war.
The S&P/ASX 200 fell 145.30, or 1.7 per cent, to 8598.20 as of 2.53pm AEDT, with all 11 sectors lower bar energy. The ASX had added 0.6 per cent on Wednesday, boosted by the banks amid rising calls that the Reserve Bank will raise interest rates next week to battle inflation, which is feared to ramp up due to the war. The Australian dollar was trading US71.55¢.
The International Energy Agency (IEA) said on Wednesday its members will release a record amount of oil, 400 million barrels from stockpiles they’ve set aside for emergencies. The move did little to calm markets: Brent crude jumped above $US100 a barrel again after Oman cleared all vessels from its key export oil terminal as a precautionary measure and two tankers were attacked in Iraqi waters.
“This is what I was concerned about with the IEA release — completely ignored, and now prices are higher,” said Darrell Fletcher, managing director for commodities at Bannockburn Capital Markets. “It may have sent the wrong signal. What do they know that we don’t?“
The biggest losers in the ASX’s latest sell-off were tech companies, as news that Atlassian will cut 10 per cent of its workforce because of the AI disruption refuelled concerns about the outlook for software makers. Rate hike fears also hurt the interest-sensitive sector. WiseTech Global lost 2.7 per cent, Xero slumped 3.9 per cent and Technology One fell 2.9 per cent.
But the banking and mining giants also heavily weighed on the market. Financial stocks, which make up a third of the ASX, gave up their gains from Wednesday. CBA fell 1.2 per cent, National Australia Bank and ANZ Bank both gave up 2.5 per cent, and Westpac lost 2 per cent.
Meanwhile, iron ore giants BHP, Rio and Fortescue were down 2 per cent, 1.9 per cent and 1.4 per cent, respectively. Gold miners Evolution Mining (down 1.2 per cent) and Newmont (down 2.6 per cent) slipped as gold prices softened.
Data centre owner Goodman Group was down 3 per cent, pulling down the property sector. Consumer staples were sent lower by a 4.1 per cent slump in Endeavour shares as bottle shop operator traded ex-dividend.
The only sector in the green were the energy companies, which climbed along with oil prices. Woodside gained 1.7 per cent and Santos advanced 1.8 per cent, while refiners Ampol and Viva Energy rose 3.3 per cent and 1.5 per cent, respectively. Coal miners Yancoal (up 10 per cent) and Whitehaven (up 5.6 per cent) surged as prices for their fossil fuel strengthened.
The falls on the ASX comes after a choppy, directionless trading session on Wall Street, as the oil price resumed its rally, which had taken it close to $US120 a barrel early this week. The S&P 500 edged down 0.1 per cent for a second day of modest moves following a wild start to the week. The Dow Jones dropped 0.6 per cent, and the Nasdaq composite rose 0.1 per cent.
“It’s all about the consumer, and how the shock of a sustained increase in oil prices is going to affect the consumer’s pocketbook and their spending habits,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Massachusetts.
Since the start of the war, sharp moves for oil prices have triggered swings up and down for financial markets worldwide, sometimes by the hour. Oil prices briefly spiked to their highest levels since 2022 this week because of the possibility that production in the Middle East could be blocked for a long time, which in turn raised worries about a surge of debilitating inflation for the global economy.
The oil surge continued even after a group representing many of the world’s wealthiest countries agreed overnight to release the largest volume of emergency oil reserves in its history, in a bid to counter the effects of the Iran war on energy markets and the halt of cargo shipping through the Strait of Hormuz. The International Energy Agency’s 400 million barrels of oil emergency release is more than double the 182.7 million barrels that the IEA’s 32 member countries released in 2022 in response to Russia’s full-scale invasion of Ukraine.
While such moves might contain oil prices in the near term, it will likely require a full resumption of the flow of oil and natural gas from the Persian Gulf area to fully ease the market. That has investors worldwide anxiously awaiting the end of the war.
The price for a barrel of Brent crude, the international standard, jumped 9.9 per cent to $US101.10 as of 2.34pm AEDT. A barrel of benchmark US crude gained 9 per cent to $US95.98.
Worries are centred on the Strait of Hormuz, a narrow waterway off Iran’s coast where a fifth of the world’s oil sails on a typical day. The war has halted most of that traffic, which means storage tanks for crude in the region are filling up because the oil has nowhere else to go. That in turn is pushing oil producers to say they’re cutting their output.
“The only thing that’s really going to bring oil prices back down is if we really see the Strait of Hormuz reopen,” Neil Beveridge, director of research at Sanford C. Bernstein & Co., said in an interview on Bloomberg Television. The flow rates from strategic reserves are “nothing compared with the 20 million barrels” a day of disruption from the Hormuz closure, he added.
The United States said it took out more than a dozen minelaying Iranian vessels, and the Islamic Republic vowed to block the region’s oil exports, saying it would not allow “even a single liter” to be shipped to its enemies.
All this is happening at a time when inflation was already relatively high in the United States. A report release overnight showed that US consumers paid prices for groceries, petrol and other costs of living that were 2.4 per cent higher in February than a year earlier.
That inflation rate was the same as the prior month’s and better than the 2.5 per cent that economists expected, but it remains above the 2 per cent target the Federal Reserve has set for the economy. It also doesn’t include petrol price shock because of the war.
“Looking forward, we expect a spring bulge in inflation due to the spike in energy prices tied to the Iran war, the duration of which will dictate the landing spot for headline inflation by year end,” according to Gary Schlossberg, global strategist at Wells Fargo Investment Institute.
High inflation combined with a stagnating economy would create a worst-case scenario called “stagflation” that the Federal Reserve has no good tools to fix. Stagflation fears are rising not just because of higher oil prices but also because of weakness in hiring by U.S. employers.
On Wall Street, the majority of stocks fell. Campbell’s sank 7.1 per cent after the soup company reported a weaker profit for the latest quarter than analysts expected. It was hurt by struggles for its snack business, and it cut its forecasts for revenue and profit this fiscal year.
Helping to limit Wall Street’s losses was Oracle, which jumped 9.2 per cent. The tech giant reported stronger profit and revenue for the latest quarter than analysts expected. It also raised its forecast for revenue growth next fiscal year, in part because of demand for cloud computing for artificial-intelligence training and inferencing.
In other international markets, indexes fell in Europe following better performances in Asia. Germany’s DAX lost 1.4 per cent, while Japan’s Nikkei 225 rose 1.4 per cent.
with AP, Reuters, Bloomberg
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