Kiwi rallies, ASX futures gain as G7 calms oil markets

The New Zealand dollar rose, and Australian futures are pointing to a bounce for the S&P/ASX 200 index after the Group of Seven advanced economies helped quell nervousness about the spike in oil prices, with French finance minister Roland Lescure saying strategic reserves are available to stabilise markets.

Brent crude oil futures were back below US$100 a barrel, cooling some inflationary fears that were seen as staying the Federal Reserve’s hand from cutting interest rates, with the yield on US government bonds declining.

Meanwhile, stocks on Wall Street and in Europe were weaker, albeit declining at a slower pace than in Asia, as carriers including American Airlines and United Airlines slid for another day, boding poorly for Air New Zealand, which has been testing all-time lows.

And Hims & Hers Health surged 41% after reaching a deal with Ozempic maker Novo Nordisk to sell weight-loss drugs through the telehealth firm’s platform, ending a legal stoush between the two firms.

The sun comes up tomorrow

Oil prices came off the boil after G7 nations moved to calm concerns about surging energy prices, saying they’re prepared to tap their strategic reserves to stabilise global markets if needed. Oil surged above US$110 a barrel on Monday as Qatar, Kuwait and the United Arab Emirates joined Iraq in throttling back their production as the freeze in traffic through the Strait of Hormuz stretches storage capacity among the producers.

Brent crude oil futures were US$99.65 a barrel at 7am in Auckland, with longer-dated contracts priced in the US$80s through to US$77.73 a barrel for December delivery.

“Analysts note that there would be a time-lag for logistics to kick in before any release from strategic stockpiles,” Bank of New Zealand senior market strategist Jason Wong said in a note. “Reserves have been previously tapped in other oil crises, but the current situation is different given the sheer size of the current loss of market supply, estimated up to 20 million barrels per day.”

The oil price decline eased some of the concerns about the inflationary impact of more expensive energy, which had been driving up government borrowing costs in recent days. The yield on 10-year US Treasuries fell 8 basis points to 4.13%, with the kiwi dollar climbing to 59.13 US cents at 7am in Auckland from 58.70 cents yesterday.

Polymarket prediction markets priced in a 62% chance of a ceasefire for the Middle East conflict by the end of May. Mojtaba Khamenei was selected as the next supreme leader of Iran, having been called an unacceptable choice by US President Donald Trump.

Not as scary

The volatility index, known as Wall Street’s fear gauge, fell 5% to 28.01, a still elevated level, and stocks in the US and Europe declined more modestly than their Asian counterparts.

The Dow Jones Industrial Average dropped 1% in late trading, while the S&P 500 was down 0.6% and the tech-heavy Nasdaq Composite declined 0.2%.

Airlines and cruise operators were among those weighing on stock exchanges as the elevated price of fuel squeezes their margins, with United, American Airlines, Royal Caribbean and Carnival among those declining.

NZX-listed Air New Zealand has slumped 15% so far this month, falling close to an all-time low as the unprofitable airline faces a spike in jet fuel prices with some of its hedges reportedly rolling off.

Energy producers such as Exxon Mobil were among Wall Street’s gainers, following similar moves for Australian producers including Santos and Beach Energy on Monday.

The UK’s FTSE 100 index dipped 0.3%, Germany’s DAX declined 0.8% and France’s CAC 40 dropped 1%.

Meanwhile, Hims & Hers jumped 41% to US$21.26 after settling a legal dispute with Danish drugmaker Novo Nordisk, which will see the telehealth platform sell Wegovy pills and injections and stop advertising other versions of drugs that use the GLP-1 active ingredient.

The improvement in risk appetite among investors is set to carry through to the antipodes, with futures indicating the ASX200 will climb 1.2% when trading opens across the Tasman.

The ANZ’s monthly Truckometer gauge of traffic movements is due today, while Argosy Property, Channel Infrastructure and Kiwi Property Group shed rights to their upcoming dividends today.

Reporting by Paul McBeth. Image from Scott Tobin on Unsplash.