NZ, Australia wake up to tense Middle East talks

The antipodes are waking up to tense Middle East negotiations as Iran paused talks after President Donald Trump warned the US could strike the Islamic Republic over its support for Hezbollah in Lebanon, raising fears the Strait of Hormuz would stay closed and push oil prices higher.

Wall Street was closed on Friday for the Juneteenth public holiday, while European stock markets were broadly weaker as softer metal prices weighed on mining companies such as London-listed Antofagasta, setting a soft lead for the resources-heavy ASX.

New Zealand’s stock market operator NZX and the financial services sector welcomed the National party’s plans to campaign on making KiwiSaver compulsory with employee and employer contribution rates rising to 6% of a person’s salary over the coming five years and introducing a $1,500 kickstart.

And the local S&P/NZX 50 index resumes trading after a heavy session on Friday when the FTSE and S&P/NZX indices were reweighted, and with heavyweight Fisher & Paykel Healthcare going ex-dividend.

Tentative talks

The US and Iran’s peace talks in Switzerland got off to a shaky start with the Islamic Republic reportedly pausing negotiations after US President Trump warned of reprisals if Hezbollah kept attacking Israel.

Brent crude oil futures rose 0.4% to US$80.59 a barrel, with investors cautious about a lasting deal being negotiated.

“The market is now balancing two competing forces: the prospect of a longer-term peace agreement and the immediate risk of constrained oil supplies,” Moomoo market strategy consultant Greg Boland said in a note. “A sustained closure would place upward pressure on inflation expectations globally and complicate the outlook for central banks, including the Federal Reserve and Reserve Bank of New Zealand.”

Australian futures were pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman, with European markets providing a weak lead with mining stocks following metal prices lower. Gold futures fell 1.7% to US$4,173 an ounce.

The UK’s FTSE 100 fell 0.4% on Friday, while Germany’s DAX dipped 0.2% and France’s CAC 40 slipped 0.6%.

The kiwi dollar traded at 57.39 US cents at 7am in Auckland from 57.29 cents last week, and was at 81.81 Australian cents from 81.94 cents.

Capital flows

Meanwhile, F&P Healthcare today sheds rights to an upcoming dividend payment of 33 cents per share, coming after heavy trading on the NZX50 on Friday as institutional investors tracking major indices needed to rejig their portfolios to match new weightings.

Moomoo’s Boland said the local stock market started the week with positive momentum, although developments around the Strait of Hormuz and oil prices would determine whether the rally could be sustained.

“For New Zealand investors, the combination of stronger domestic growth, a resilient NZX, falling New Zealand dollar and heightened geopolitical uncertainty creates a mixed backdrop,” he said.

And the coalition government’s National party said it would campaign on strengthening the KiwiSaver scheme at its annual conference on Sunday, making the state-backed savings programme compulsory, lifting contribution rates and introducing a new incentive for all newborns.

The NZX and Financial Services Council welcomed the changes, with the stock market operator noting it should help deepen domestic capital markets.

Reporting by Paul McBeth. Image from J.f Manzanero on Unsplash.