Iran close to deal on Strait of Hormuz

Oil prices remained elevated in a relatively quiet trading session as the US observed the Labor Day public holiday, with Iran saying it was close to closing a deal with Oman to manage shipping through the Strait of Hormuz, despite the latest escalation in fighting with America.

Stock markets in Europe were mixed with Wall Street closed, with tech companies such as Dutch semiconductor equipment maker ASML following a strong lead in Asia, while German reinsurers Munich Re and Hannover Re were softer as the industry adjusts to new pricing.

US President Donald Trump ratcheted up the rhetoric with Canada, saying plane maker Bombardier wouldn’t be allowed to sell planes in the US unless it starts manufacturing them in the country, while Malaysia’s consideration of using Huawei Technologies’ artificial intelligence chips threatened to antagonise the White House.

The Australian Tax Office revealed a new rule that could capture more domestic revenue from big tech firms, while futures are pointing to a soft start to the day for the ASX, despite the likely boost for miners from copper hitting a new record.

Labouring away

Brent crude oil futures rose 1% to US$97.27 a barrel at 7am in Auckland amid the latest escalation between the US and Iran, even as the Islamic Republic said it’s days away from closing a deal with Oman to agree a route for oil tankers through the Strait of Hormuz. The deal would be documented through the International Maritime Organisation.

“The US is not party to any agreement, and Trump has previously threatened to bomb Oman, so let’s see how that plays out,” Bank of New Zealand senior markets strategist Jason Wong said in a note.

Metals prices were mixed in a subdued trading session with US markets closed for a public holiday, with copper prices climbing above US$14,530 a tonne for the first time as the data centre boom drives demand for the metal and amid expectations of expanded US tariffs on refined copper. Meanwhile, gold futures dipped 0.6% to US$4,452 an ounce.

With Wall Street closed, European stock markets were mixed with Germany’s DAX slipping 0.2%, weighed down by reinsurers Hannover Re and Munich Re as the sector faces lower prices as they renegotiate terms with primary insurers at their annual meeting in Monaco amid warnings of growing natural disasters.

The UK’s FTSE 100 slipped 0.1%, while France’s CAC 40 advanced 0.3%.

The kiwi dollar fell to 90.71 yen at 7am from 91.67 yen yesterday, with Japan’s currency stronger as empty US trading desks thinned out market liquidity, and as traders stay alert for another potential intervention by authorities. The local currency traded at 58.77 US cents from 58.75 cents.

Belabouring the point

US-Canada relations remained fraught as the neighbours slap tariffs on each other, with Trump heightening the rhetoric in saying Canadian plane maker Bombardier wouldn’t be allowed to sell into the US unless it set up manufacturing south of the border.

Meanwhile, Bloomberg reported that Malaysia faced antagonising the White House as the South East Asian nation considered using Huawei’s AI chips as the bedrock of a 2 billion ringgit plan to give it greater sovereignty over its data.

The trial of US claims that Huawei dodged US sanctions and stole intellectual property will start in New York this month, with jury selection due to start on Tuesday in the US, more than eight years after the tech company was charged.

Meanwhile, the Australian Financial Review reported that an Australian Tax Office ruling meant income from cloud services operated by Amazon, Google and Microsoft, and streaming services sold by Apple, Spotify and Netflix would be taxable in Australia for the first time.

And the Financial Times reported New Zealand-founded fintech FNZ’s cash burn and shrinking valuation had attracted concerns after raising another US$450 million this week as it embarks on a US expansion.

Futures are pointing to a 0.1% dip for the S&P/ASX 200 index when trading opens across the Tasman as elevated oil prices continue to pose inflationary pressures around the world.

Greg Boland, market strategy consultant at Moomoo, said US inflation data this week will be key for whether the Federal Reserve raises the federal funds rate later this month.

Local data today include Statistics New Zealand’s June quarter business financial data, which will feed into economists’ final forecasts for gross domestic product.

And New Zealand’s S&P/NZX 50 – which is a gross index incorporating dividends – will have the added headwind of three companies going ex-dividend: Argosy Property, Vector and Channel Infrastructure.

Reporting by Paul McBeth. Image from Marlin Clark on Unsplash.