NZ dollar falls as Trump orders Iran blockade after peace talks break down

The New Zealand dollar slipped at the start of the week as the antipodes woke up to US President Donald Trump ordering a blockade of the Strait of Hormuz after peace talks broke down with Iran after the Islamic Republic refused to accede to demands for it to ditch its nuclear aspirations.

Meanwhile, Australian futures are still pointing to a positive opening for the ASX when trading starts across the Tasman, with tech stocks in view after Atlassian was pushed out of the Nasdaq 100 index by semiconductor firm Sandisk and after Morgan Stanley analysts slashed valuations for a slew of software firms, including Xero.

Stocks on Wall Street were mixed on Friday after accelerating inflation weighed on the Dow Jones Industrial Average, with software firm Salesforce still under pressure, while the tech-heavy Nasdaq Composite was powered by the likes of Nvidia and Amazon.

And local firms such as Tower, Port of Tauranga and Scales Corp will start assessing the impact of Cyclone Vaianu after the storm closed highways over the weekend, with warnings expected to roll off after the weather system was less intense than feared.

No deal

The kiwi dollar fell to 58.16 US cents at 7.30am in Auckland from 58.43 cents at 7am and 58.47 cents last week after US President Trump said the US Navy would start blockading the Strait of Hormuz after peace talks over the weekend with Iran failed to reach a lasting truce after the Islamic Republic balked at giving up its nuclear programme.

Iran said the approach of any military vessels would be treated as a violation of the ceasefire.

New Zealand’s Ministry of Business, Innovation and Employment is due to update the latest fuel stocks later today.

“The collapse of those negotiations and the US announcement of a naval blockade in the Strait of Hormuz is likely to weigh on risk appetite when markets re-open today, and that is likely to be negative for the Kiwi despite higher local interest rates following last week’s RBNZ MPR,” ANZ New Zealand economists said in a note, referring to the Reserve Bank’s monetary policy review.

Stocks on Wall Street had been mixed heading into the weekend peace talks, with the Dow falling 0.6% as software giant Salesforce remained under pressure, while gains for Nvidia and Amazon helped buoy the Nasdaq’s 0.4% gain. Inflation figures on Friday showed prices rose at a faster pace in March, while a consumer sentiment survey showed households felt the pinch that month.

European markets were flat on Friday, with marginal declines for the UK’s FTSE 100 and Germany’s DAX, while France’s CAC 40 nudged up 0.2%.

New leadership

The kiwi dollar fell to 49.75 euro cents from 50.01 cents last week after Hungarian President Viktor Orban conceded defeat after more than half the votes had been counted in the nation’s election.

Investors are turning their minds to the upcoming earnings season, with Goldman Sachs the first of the major Wall Street banks reporting this week, while France’s LVMH Moet Hennessy Louis Vuitton setting the benchmark for luxury stocks.

FactSet analysis said S&P 500 companies are projected to report 13% growth in first quarter earnings, noting that they typically beat estimates.

Australian futures are pointing to a 0.8% gain for the S&P/ASX 200 index when trading opens across the Tasman.

Tech stocks will be in view after Atlassian was replaced in the Nasdaq 100 by Sandisk on April 20 in the latest index review, while Morgan Stanley analysts cut their valuations on a raft of ASX-listed software firms, slashing its target price on Xero by 42% to A$130. The New Zealand-founded accounting software firm has dropped 37% so far this year, closing at A$71.46 on Friday.

Local data today include Bank of New Zealand-BusinessNZ’s performance of services index, following more subdued manufacturing activity in its sister survey last week.

Meanwhile, firms such as Tower, Port of Tauranga and Scales will start assessing the damage from Cyclone Vaianu after the storm rocked parts of the North Island over the weekend, closing highways and causing power outages. The cyclone wasn’t as intense as feared after moving east before making landfall.

Reporting by Paul McBeth. Image from Michael Afonso on Unsplash.