Morning traders. Thanks loungers, especially @Ravgnome and @Patterns. Interesting day ahead. Certainly didn't get the US session that many, including myself, were anticipating.
Outlook for the day: Positive as financial markets breathe a sigh of relief over Iran's restrained response to weekend US attacks.
ASX futures: up 62 points or 0.73%
Overnight themes:
US stocks rallied as Iran's limited retaliation to US air strikes soothed fears of an escalating conflict, driving energy prices sharply lower and boosting risk appetite.
The S&P 500 climbed 0.96% as central bank officials laid the groundwork for a July interest rate cut. The Dow bounced 375 points or 0.89%. The Nasdaq Composite put on 0.94%.
A relief rally swept stocks higher after Iran restricted its response to Saturday's US bombing raid to a missile assault on a US base in Qatar. The attack was flagged in advance with US authorities and caused no casualties and little damage. The White House claimed 13 of 14 missiles were intercepted and the last was allowed to continue because it was not going to cause any damage to US assets. President Donald Trump tweeted afterwards: "Congratulations world, it's time for peace".
"I think there was a lot of concern that Iran would do much more than it did," Paul Nolte, senior wealth advisor & market strategist at Murphy & Sylvest, told Reuters.
Oil prices plunged. Brent crude settled US$5.53 or 7.18% lower at US$71.48 a barrel as some of the "risk premium" was priced out. The US oil benchmark, West Texas Intermediate, dropped 7.22% to US$68.51. The sharp declines represented relief that the Strait of Hormuz remained open and no energy infrastructure has been damaged so far.
“Markets only care about oil supply shocks, so as long as they stay at bay, we’ll see markets sharply higher,” Jamie Cox, managing director at Harris Financial Group, told CNBC. “Regardless of whether the President oversold the effectiveness of the strikes or not, the nuclear program in Iran was set back decades.”
Also helping risk appetite was growing signs that the Federal Reserve is preparing to lower benchmark rates. Overnight, Vice Chair Michelle Bowman said, "It is time to consider adjusting the policy rate". Chicago Fed President Austan Goolsbee said tariff hikes have had a more limited impact on the economy than many feared. Fed Governor Christopher Waller said late last week that the inflationary risk from tariffs was so small the central bank should cut as soon as its next meeting. The market has priced in two quarter-percentage-point cuts this year but does not expect the first cut until September.
Consumer and property stocks led the charge. The consumer discretionary sector gained 1.75%, real estate 1.49% and consumer staples 1.3%. The financial and materials sectors both put on around 1.2%. Energy was the only sector drag, falling 2.51%.
Iron ore climbed to its highest in more than a week in China trade on signs that steel production remains robust. Hot-metal output lifted 0.24% last week from the week before, soothing demand worries as the industry enters the off-season after the Spring peak in construction. Benchmark ore on the Dalian Commodity Exchange climbed 0.5% to US$98.25 a metric ton.
Gold attracted modest inflows as investors turned to traditional havens in times of geopolitical stress, but struggled to add to last week's gains. US gold futures settled US$9.20 or 0.3% higher at US$3,395 an ounce. Spot gold slipped into the red, easing US$1.04 or 0.03% to US$3,367.95.
Aluminium hit a three-month high in London as traders priced in possible disruptions to shipments from the Middle East following US strikes on Iran. "Middle East countries produce almost 9% of the world’s aluminium," Alastair Munro, senior base metals strategist at broker Marex, told Reuters. "If the Strait of Hormuz is blocked, that could affect shipments." Benchmark aluminium on the London Metal Exchange climbed 1.67% to US$2,592 a metric ton. Copper firmed 0.63% to US$9,694.50.
Key events today:
Congressional testimony by US Federal Reserve Chair Powell - tonight
US consumer confidence - tonight
S&P 500: up 57 points or 0.96%
Dow: up 375 points or 0.89%
Nasdaq: up 184 points or 0.94%
VIX: down 3.83% to 19.83
US 10-year treasury yield: down 3.4 points to 4.349%
Dollar: up 0.19% to 64.58 US cents
Iron ore (Dalian): up 0.5% to US$98.25
Brent crude: down US$5.53 or 7.18% to US$71.48
Gold (futures): up US$9.20 or 0.3% to US$3,395
Gold (spot): down US$1.04 or 0.03% to US$3,367.95
Silver (spot): up 10 US cents or 0.28% to US$36.10
Palladium (spot): up US$55 or 5.28% to US$1,074
Antimony (China ore): down 0.08% to US$19,780
NYSE Arca Gold Bugs: up 1.13%
Bitcoin: up 4.69% to US$104,116
Copper (LME): up 0.63% to US$9,694.50
Nickel (LME): down 1.46% to US$14,840
Lithium carbonate (China spot battery grade): down 0.82% to 7,365 yuan
Global X Lithium & Battery Tech ETF: up 1.63%
Uranium (spot): up 1.14% to US$77.88
Global X Uranium ETF(URA): up 2.09%
BHP: up 1.5% (US); down 0.2% (UK)
