Miners tumble as gold drops; stock markets still on edge
Central banks are getting ready to act if the energy shock forces their hands.
Stocks on Wall Street and in Europe extended their declines as oil prices remained elevated following strikes on Middle East gas fields yesterday, with US Treasury secretary Scott Bessent considering lifting sanctions on Iranian oil already on the water to ease some of those prices.
Miners including Newmont Corp tumbled as gold prices sank, with central bankers in Europe, the UK, Japan and Switzerland keeping their benchmark rates on hold and leaning towards tighter policies if the energy shock revives inflation.
That’s set to flow through to the antipodes with futures pointing to another decline for Australia’s resources-heavy S&P/ASX 200 index when trading opens across the Tasman, with Statistics New Zealand’s monthly merchandise trade figures due today.
And New Zealand’s policymakers are working on a response plan to energy shocks, with finance minister Nicola Willis tasking officials to develop a targeted support package for those feeling the pinch most acutely.
Ready to act
Global markets remained on edge with US and European stock markets weaker with Brent crude oil futures at US$108.63 at 7am in Auckland after attacks on Middle East gas fields heightened tensions in the region.
Kuwait suspended operations at two of its refineries and US Treasury secretary Bessent said he’s considering easing sanctions on some Iranian oil that’s already on the water to ease some of the price pressure in energy markets.
Central bankers in Europe, the UK, Switzerland, Sweden and Japan kept their respective benchmark rates on hold, noting the uncertainty caused by the Middle East conflict and indicating a readiness to act if inflationary pressures escalate.
European Central Bank president Christine Lagarde said the conflict created upside inflation risks while also posing a downside risk for economic growth.
Polymarket prediction market pricing showed dwindling expectations for an early end to the conflict, implying a 30% chance of a ceasefire by the end of April, down from 37% yesterday, and doesn’t switch to a better-than-even chance of 53% in June.
“Global markets remained volatile overnight, with equities under pressure as Middle East headlines lifted energy prices and pushed global yields higher,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “Oil and natural-gas prices remain elevated after the latest round of attacks on Middle Eastern energy facilities stoked fears of a full-blown energy crisis.”
Open to intervention
Japan’s yen was broadly stronger after the nation’s finance minister Satsuki Katayama said the government was ready to act if needed, with the kiwi dollar falling to 92.29 yen at 7am in Auckland from 92.89 yen yesterday. The New Zealand dollar rose to 58.48 US cents from 58.18 cents.
The heightened uncertainty and ongoing pause in interest rates weighed on Wall Street, with the S&P 500 down 0.7% and the Dow Jones Industrial Average falling 0.9%. The tech-heavy Nasdaq Composite fell 0.8%.
Miner Newmont tumbled 8.9% in late trading, following declines in precious metals with gold futures sliding 5.5% to US$4,629 an ounce as the prospect of higher interest rates tarnished the lustre of the traditional safe-haven asset.
European markets fared worse, with the UK’s FTSE 100 down 2.4%, Germany’s DAX falling 2.8% and France’s CAC 40 dropping 2%.
The dour outlook is set to continue into Asia, with futures pointing to a 0.8% slide for the resources-heavy ASX200 when trading opens across the Tasman.
Meanwhile, New Zealand’s S&P/NZX 50 index is on track for its third weekly decline, down 1% so far this week.
Local data today include Stats NZ’s merchandise trade figures for February.
New Zealand is working on an emergency response if the energy shock continues, with prime minister Christopher Luxon warning the situation could get worse before it improves. Finance minister Nicola Willis has asked Inland Revenue Department and Treasury officials to advise on a potential temporary support package for households most acutely affected by the rising cost of petrol prices.
Reporting by Paul McBeth. Image from Shane McLendon on Unsplash.
