Oil drops amid Middle East peace optimism; Wall Street rallies

Oil prices tumbled on optimism that peace talks would resume in the Middle East, with Iranian President Masoud Pezeshkian saying the government had been granted more authority to pursue negotiations, and US President Donald Trump telling Israeli prime minister Benjamin Netanyahu that he was open to more diplomacy.

Stocks on Wall Street rallied on the cheaper energy prices, with gains among tech companies such as Nvidia and Alphabet driving the world’s biggest stock market higher, while investors keep one eye on the upcoming US midterm elections as Polymarket bets price in the Democrats to win both the Senate and the House of Representatives.

Anthropic updated its prospectus to show revenue continued to surge in the September quarter, while investors are waiting on earnings from Apple and Palantir Technologies after the bell.

And the resources-rich ASX is poised to rally when trading opens across the Tasman, with gold prices back on the rise, while analysts anticipate a rate hike from the Reserve Bank of Australia before attention turns to the Melbourne Cup.

Losing energy

Brent crude oil futures dropped 7.7% to US$104.73 a barrel at 7am in Auckland, their lowest level since early October, amid reports that Iran and the US were open to renewing peace talks to end the protracted conflict in the Middle East, which has pushed up energy prices and prompted central banks around the world to hike interest rates.

Meanwhile, the Wall Street Journal reported the US was backing a quick resumption of Russian gas sales to Europe, using pipelines running through Ukraine, as part of negotiations to secure an energy ceasefire.

The yield on US 10-year treasuries fell 5 basis points to 4.88% and stocks on Wall Street gained as investors regained their appetite for riskier assets. Still, the Cboe volatility index, known as Wall Street’s fear gauge, climbed 3.1% to 20.02.

“Lower oil prices have supported global bond markets, sending rates lower, and have also supported equity markets,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “However, the reality is that one side will need to give ground, otherwise the stalemate will continue.”

And the US midterm elections continue to cloud the outlook on what a change in control of the legislative arms of government could have on various sectors. Polymarket trading has priced in a 74% chance of the Democrats taking control of the Senate and a 96% chance of winning a majority in the House.

The Dow Jones Industrial Average rose 0.9% in late trading, with manufacturer Sherwin-Williams, Amazon and Visa leading the blue-chip index higher, while the S&P 500 and tech-heavy Nasdaq Composite were both up 0.3%.

Hey Claude

Anthropic updated its S-1 filing with the US Securities and Exchange Commission, showing the Claude developer’s September quarter revenue surged to almost US$17 billion from US$1.4 billion a year earlier, for an operating loss of US$567 million.

Marvell Technology declined after it agreed to buy data centre optics maker Lumentum Holdings at an enterprise value of US$115 billion in an all-share deal, while Oracle Corp fell after the software giant said it planned to raise US$20 billion through bond and share sales to fund its AI and cloud infrastructure build.

Estée Lauder shares fell despite the beauty conglomerate beating earnings expectations and raising its outlook, while Marriott International rallied as the hotel operator lifted quarterly revenue on growing demand in the US and Canada.

Bitcoin slipped 1% to US$77,055 as crypto exchange Binance faced more withdrawals after its hack last week.

Markets in Europe were also stronger, with the UK’s FTSE 100 up 0.3%, Germany’s DAX gaining 0.6% and France’s CAC 40 advancing 1%.

Australian futures are pointing to a 0.7% gain for the S&P/ASX 200 index when trading opens across the Tasman. Gold futures were up 1.8% at US$3,968 an ounce at 7am in Auckland.

The RBA is expected to raise the target cash rate 25 basis points to 4.85% when it reviews policy today, with officials talking up inflationary pressures in recent weeks. The kiwi dollar rose to 80.24 Australian cents from 79.97 cents yesterday, and traded at 56.25 US cents from 56.17 cents.

Local data today include Statistics New Zealand’s new building consents for September, which are expected to show more strength in residential issuance.

Reporting by Paul McBeth. Image from Red Shuheart on Unsplash.