Outlook for the day: The ASX faces early selling pressure following sharp Friday falls on Wall Street and three days of hostilities between Israel and Iran across the weekend.
ASX futures: down 20 points or 0.23%
Friday/weekend themes:
US stocks skidded on Friday after Israel attacked Iranian nuclear assets, prompting retaliation from Tehran. Oil, gold and the US dollar rallied as investors turned to traditional havens. Risk assets fell.
The S&P 500 declined 1.13% to its second loss in three sessions and a one-week closing low. The Dow slumped 769 points or 1.79%. The Nasdaq Composite shed 1.3%.
Investors turned risk-averse after Israel launched a series of air strikes deep into Iran. Tehran responded with a barrage of ballistic missiles and drone attacks. Attacks continued across the weekend into a third day. Both sides reported casualties.
Oil surged to double-digit percentage gains on Friday before paring its advance. Brent crude soared from US$69.36 a barrel to US$78.50, a fleeting gain of 13.1% and a level last seen in January. The international crude benchmark later settled US$4.87 or 7% ahead at US$74.23 as the rally lost some of its heat. Similarly, the US benchmark, West Texas Intermediate, jumped 14% before settling US$4.94 or 7.3% ahead at US$72.98.
“It looks as though we could be in for a full-blown military conflict," Elias Haddad, senior markets strategist at Brown Brothers Harriman, told Reuters. "If it ends up closing down the Strait of Hormuz, where a third of global oil supply goes through, this could have some pretty nasty effect on global markets."
The S&P Energy sector jumped 1.72% as Exxon Mobil gained 2.18% and Chevron added 0.65%. Other winners included defence stocks such as Lockheed Martin and Northrop Grumman. Airlines and other companies exposed to energy price rises sank. Delta, United Airlines and American Airlines all lost at least 3.8%.
Wall Street's "fear gauge", the VIX or Volatility Index, jumped 15.54% to a three-week high at 20.82. However, the measure remained far below the heights reached in April during the "reciprocal tariff" stock market plunge.
Financials and tech bore the brunt of the selling. The S&P financial sector gave up 2.06%. Tech lost 1.5%.
Friday's falls tipped the major benchmarks into negative territory for the week. The S&P 500 lost 0.4%, the Nasdaq 0.6% and the Dow 1.3%.
Gold flew back towards record levels as investors turned to a traditional haven in times of elevated geopolitical tensions. Gold futures settled US$50.40 or 1.5% higher at US$3,452.80 an ounce. The spot price climbed US$46.01 or 1.36% to US$3,432.03. "Prices will stay elevated in the anticipation of what is to come, the retaliation by Iran," Daniel Pavilonis, senior market strategist at RJO Futures, told Reuters.
Most industrial metals retreated in London as investors rotated out of "risk assets" into oil and havens. Benchmark copper on the London Metal Exchange fell 0.59% to US$9,645 a metric ton. Aluminium, nickel, zinc and lead also declined. "The market is de-risking on copper and aluminium," Alastair Munro, senior base metals strategist at broker Marex, told Reuters. "Current events remove the likelihood of our running away to the topside. The declines, of course, are set to please those looking for dips to buy."
Iron ore eased for a second session. Benchmark ore on the Dalian Commodity Exchanged dipped 0.14% in daytime trade to US$97.90 a metric ton to extend its decline for the week to 0.7%. July ore futures dropped 0.15% in Singapore to US$94.40 for a weekly loss of 1.2%.
The week ahead brings Chinese factory data, domestic employment figures for May, a US interest rate decision and a US market holiday on Thursday.
Key events this week:
China industrial production, retail sales - 12 pm AEST
US retail sales - Tuesday
US Federal Reserve interest rate decision - Wednesday
US unemployment benefit claims - Wednesday
May jobs report - Wednesday
US market closed for Juneteenth public holiday - Thursday
S&P 500: down 68 points or 1.13%
Dow: down 770 points or 1.79%
Nasdaq: down 256 points or 1.3%
VIX: up 15.54% to 20.82
US 10-year treasury yield: 4.406%
Dollar: up 0.04% to 64.98 US cents
Iron ore (Dalian): down 0.14% to US$97.90
Brent crude: up US$4.87 or 7% to US$74.23
Gold (futures): up US$50.40 or 1.5% to US$3,452.80
Gold (spot): up US$46.01 or 1.36% to US$3,432.03
Silver (spot): down 4 US cents or 0.11% to US$36.23
Palladium (spot): down US$37 or 3.49% to US$1,023.50
Antimony (China ore): up 0.17% to US$20,343
NYSE Arca Gold Bugs: up 1.64%
Bitcoin: down 0.35% to US$104,618
Copper (LME): down 0.59% to US$9,645
Nickel (LME): down 0.09% to US$15,128
Lithium carbonate (China spot battery grade): up 0.17% to 7,455 yuan
Global X Lithium & Battery Tech ETF: down 1.78%
Uranium (spot): steady at US$69.63
Global X Uranium ETF(URA): up 0.33%
BHP: down 2.53% (US); down 2.08% (UK)
