Bond market groans, stocks fall as MidEast conflict intensifies
Comvita said to have new billionaire friend.
Stocks in Europe and the US sank and government bond yields rose as the conflict in the Middle East intensified, with Iran launching a fresh wave of bombing across the Persian Gulf and US President Donald Trump saying he wanted to be involved in replacing the Islamic Republic’s supreme leader.
US carriers including United Airlines and Delta Air Lines were again at the bottom of Wall Street’s leaderboard as risk sentiment soured, with Brent crude oil climbing above US$85 a barrel and the Polymarket prediction market putting slim odds on the conflict ending in the next month.
Chipmaker Broadcom was among the day’s gainers after doubling its artificial intelligence in the latest quarter on the ballooning demand for the new technology, while Nvidia dropped after a report the White House has drafted regulations restricting AI chip exports without American approval.
And NZX-listed Comvita is said to have a new strategic shareholder in the form of ThaiBev’s Fraser and Neave.
Volatility reigns
Markets whipped back from their brief respite with the Dow Jones Industrial Average sinking 2% in late trading, with heavy equipment maker Caterpillar, biotech firm Amgen and big-box retailer Walmart leading the blue-chip index lower as risk sentiment soured amid the latest wave of bombings across the Middle East.
The volatility index, known as Wall Street’s fear gauge, jumped 17% to 24.64 as Iran launched a fresh wave of attacks, while Israel stepped up strikes on Lebanon and Tehran. US President Trump also said he must be involved in picking Iran’s next leader after the opening strikes killed Ayatollah Ali Khamenei.
Betting on the Polymarket prediction market puts a 29% chance of the conflict ending by the end of the month and a 43% chance of wrapping up before the end of April.
The kiwi dollar dropped to 58.81 US cents at 7am in Auckland from 59.27 cents yesterday amid the renewed bout of risk aversion, as the yield on US 10-year Treasuries rose 3 basis points to 4.14%. Bond yields have been rising on fears the oil supply shock will stop the Federal Reserve from cutting interest rates as aggressively as previously hoped.
“The conflict with Iran has entered a sixth day and risk sentiment has soured a little further as the attacks around the gulf region continue and extend further afield,” Bank of New Zealand senior market strategist Jason Wong said in a note. “There is no sign of an end to the conflict in the Middle East with Iranian officials warning attacks will intensify.”
Turbulent times
The S&P 500 was down 1.3% in late trading with carriers such as United and Delta near the bottom of the leaderboard as the rising cost of oil threatens airlines’ margins. NZX-listed Air New Zealand has weathered the rise in fuel prices relatively well, with the national carrier’s hedging programme cushioning it from the impact.
A strong result by Broadcom didn’t spill over to broader gains for the tech-heavy Nasdaq Composite, which was down 1.2%, with larger rival Nvidia down 2.1% after Bloomberg reported the White House has drafted regulations giving Washington broad control over exports of AI chips.
Stock markets in Europe were similarly rocked, with the UK’s FTSE 100 index down 1.5%, Germany’s DAX falling 1.3% and France’s CAC 40 declining 1.5%.
That’s set to flow through into the antipodes, with Australian futures pointing to a 1.3% decline for the S&P/ASX 200 index when trading opens across the Tasman.
New Zealand’s S&P/NZX 50 index joined in the global rally on Thursday, including companies that had shed rights to dividends, which would usually see those prices adjust for the capital outflow. No NZX-listed companies are going ex-dividend today.
Meanwhile, honey products maker Comvita will be in focus after The Australian’s Dataroom column reported Singapore’s Fraser and Neave, controlled by billionaire Charoen Sirivadhanabhakdi, has bought a significant stake in the company. Comvita is working to strengthen its balance sheet after shareholders rejected a takeover offer last year, and said it had received interest from an international investor willing to pay a premium.
Reporting by Paul McBeth. Image from Denys Nevozhai on Unsplash.
