Outlook for the day: Mildly negative after the threat of deeper US involvement in the Israel-Iran conflict weighed on Wall Street.
ASX futures: down 16 points or 0.19%
Overnight themes:
US stocks fell as the Israel-Iran conflict entered a fifth day and economic data fell short of expectations. Investors reduced risk as US President Donald Trump called for Iran's "unconditional surrender" and moved fighter planes to the Middle East. Oil prices rebounded, sharpening inflationary pressures on the economy.
The S&P 500 shed 0.84% as stocks wilted in afternoon trade. The Dow Jones Industrial Average dropped 299 points or 0.7%. The Nasdaq Composite gave up 0.91%.
Fears that the US will get drawn into another war in the Middle East were exacerbated by news that the US was deploying more military aircraft to the region and by President Trump's call for Iran to surrender. "We know exactly where the so-called 'Supreme Leader' is hiding," Trump posted on Truth Social. "We are not going to take him out (kill!), at least for now... Our patience is wearing thing." Minutes later he posted: "UNCONDITIONAL SURRENDER!"
Trump's comments appeared to represent an escalation from his previous stance, when he denied US involvement in Israel's attack on Iran and emphasised the defensive nature of US military plans in the region. He met with his National Security Council overnight to discuss the conflict.
"We're in a period where visibility is not great, uncertainty is high, and the wall of worry is under construction," Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told Reuters.
Also weighing on risk appetite was news that retail sales contracted more than expected last month as Americans closed their wallets. Sales declined 0.9%, lower than a 0.6% contraction forecast by economists. “The economy is slowing with consumers nervous about exactly what lies ahead and are choosing to save overall rather than flash some cash at the shops and malls,” Chris Rupkey, Fwdbonds chief economist, told CNBC.
Energy was the only S&P sector to post a gain, adding 1.03% as crude prices rallied. Declines across the rest of the market ranged from 0.41% for real estate up to 1.64% for health. The materials sector shed 1.01%.
Oil bounced more than 4% on the threat of an extended conflict. While Iranian crude production has not yet seen significant disruption, an Israeli strike on a gas field reduced output. Israeli missiles have also hit the Shahran oil depot. Brent crude settled US$3.22 or 4.4% higher at US$76.45 a barrel. The US crude benchmark, West Texas Intermediate, settled 4.28% ahead at US$74.84.
Silver hit a 13-year high as developments in the Middle East boosted demand for havens. Spot silver was lately up 80 US cents or 2.21% to US$37.12 an ounce, a level last seen in February 2012. Citi forecast prices could hit US$40 per ounce this year. "We expect silver availability to tighten on consecutive years of deficit, sticky stockholders requiring higher prices to sell, and robust investment demand," Citi wrote. A strengthening greenback kept a lid on the gold price. Gold futures declined US$10.40 or 0.3% to US$3,406.90 an ounce. Spot gold edged up US$4.30 or 0.13% to US$3,388.50.
Iron ore and most industrial metals retreated as the US dollar rallied and investors reduced risk. Benchmark ore on the Dalian Commodity Exchange eased 0.07% to US$97.21 a metric ton. The Singapore ore benchmark dropped 0.4% to US$94.86. On the London Metal Exchange, copper eased 0.34% to US$9,670 a metric ton. Nickel gave up 0.86%, zinc 0.88%, tin 0.92% and lead 1.57%. Aluminium bucked the trend with a rise of 1.34%.
"Another war has broken out, unsettling investors, raising concerns about long-term global growth, and prompting a shift away from cyclical assets like base metals and a move towards safe-haven assets," Panmure Liberum analyst Tom Price told Reuters.
Key events today:
US Federal Reserve interest rate decision - tonight
US unemployment benefit claims - tonight
S&P 500: down 50 points or 0.84%
Dow: down 299 points or 0.7%
Nasdaq: down 180 points or 0.91%
VIX: up 13.03% to 21.6
US 10-year treasury yield: down 6.5 points to 4.391%
Dollar: down 0.55% to 64.76 US cents
Iron ore (Dalian): down 0.07% to US$97.29
Brent crude: up US$3.22 or 4.4% to US$76.45
Gold (futures): down US$10.40 or 0.3% to US$3,406.90
Gold (spot): up US$4.30 or 0.13% to US$3,388.50
Silver (spot): up 80 US cents or 2.21% to US$37.12
Palladium (spot): up US$20 or 1.95% to US$1,045.50
Antimony (China ore): up 0.03% to US$20,343
NYSE Arca Gold Bugs: down 0.12%
Bitcoin: down 4.1% to US$104,394
Copper (LME): down 0.34% to US$9,670
Nickel (LME): down 0.86% to US$14,935
Lithium carbonate (China spot battery grade): down 0.05% to 7,430 yuan
Global X Lithium & Battery Tech ETF: down 1.27%
Uranium (spot): up 0.67% to US$75
Global X Uranium ETF(URA): down 1.34%
BHP: down 2.29% (US); down 1.49% (UK)
