Oil extends decline; investors move out of chip stocks
Infratil might have a buyer lined up for Qscan.
Oil prices fell for a third day as the US and Iran stepped back hostilities while negotiations between the Islamic Republic and Oman to reopen the Strait of Hormuz continue, which would pave the way for more formal peace talks, with President Donald Trump saying he’d like to avoid a renewed bombing campaign.
Stocks on Wall Street and in Europe rallied as investors continued to move out of chip stocks such as Sandisk, Coherent and Micron Technology, while manufacturer Sherwin-Williams led the Dow Jones Industrial Average higher after beating earnings expectations.
The US Federal Reserve’s latest policy review on Wednesday in Washington is high on the agenda, with the federal funds rate expected to stay unchanged, while results from Microsoft, Meta Platforms, Amazon and Apple will provide the latest gauge on the artificial intelligence sector.
Australian media is reporting that Infratil has granted exclusivity to Pacific Equity Partners in the auction for medical imaging business Qscan, while inflation data across the Tasman and quarterly earnings from ASX-listed Rio Tinto are the main events in the local session.
Cheaper fuel
The Brent crude oil spot price fell 4.3% to US$83.94 amid growing optimism the end to hostilities between the US and Iran would hold as officials seek to resume formal peace negotiations.
The spike in fuel prices this month revived inflation concerns among central banks, and the Fed’s upcoming policy announcement will be closely watched for signs that the central bank will raise the benchmark rate in future meetings.
“Markets are now focused on the Federal Reserve meeting, with interest rates widely expected to remain unchanged,” Moomoo market strategy consultant Greg Boland said in a note. “Investors will instead be watching chair Kevin Warsh's comments for clues on whether policymakers still expect another rate hike later this year.”
The kiwi dollar rose to 57.90 US cents at 7am in Auckland from 57.67 cents yesterday.
Meanwhile, stock markets were stronger on both sides of the Atlantic as investors continued their rotation out of AI-related companies after the latest concerns about the pace of infrastructure investment and their circular financing structures, and the rise of Chinese rivals. The tech-heavy Nasdaq Composite was marginally weaker in late trading.
Meta and BlackRock announced plans to build a US$14 billion data centre in El Paso, Texas, with the one gigawatt facility expected to open in 2028.
Manufacturing gains
Sherwin-Williams surged 8.4% to lead the Dow higher in late trading – the blue-chip index rose 1.1% – after the manufacturer beat earnings expectations, winning market share even as it lifted prices. Boeing was also among the Dow’s leaders after generating better cash flow than expected in the second quarter with strong demand for its aircraft.
Among other companies reporting, Coca-Cola raised its annual outlook and airline JetBlue Airways reaffirmed its guidance and anticipated positive cash flow next year.
Meanwhile, Hilton Worldwide dipped even after reporting increased sales as its US hotels showed the fastest pace of revenue growth, and Royal Caribbean beat expectations as it raised its profit forecast despite travel disruption caused by the Middle East conflict.
The S&P 500 was up 0.4%, while across the Atlantic, the UK’s FTSE 100 rose 0.8%, Germany’s DAX advanced 0.4% and France’s CAC increased 0.4%.
Luxury firm Kering’s flagship Gucci brand was buoyed by US consumers as sales fell less than expected, while Ray-Ban maker Essilor Luxottica’s earnings comfortably beat analysts’ forecasts.
Payments group Visa is due to report after the bell, having flagged plans to lay off 2,600 people, or 7% of its workforce.
The rally in Europe and the US is set to flow through to the antipodes, with Australian futures pointing to a 0.9% gain for the S&P/ASX 200 index.
Australian inflation data out today is expected to show consumer prices rose 0.7% in the June quarter.
And The Australian Financial Review’s Street Talk column reported that Infratil granted PEP exclusivity in the auction for the Qscan after the private equity firm agreed to pay about A$900 million.
Reporting by Paul McBeth. Image from Zbynek Burival on Unsplash.
