Wall St, Europe surge on shaky ceasefire
Sharesies investor sentiment knocked by Middle East conflict.
Stocks on Wall Street and in Europe surged on the ceasefire between the US and Iran, with carriers including American Airlines and cruise operators such as Carnival Corp rallying as oil prices tumbled back below US$100 a barrel, while energy majors such as Exxon Mobil and Chevron declined.
The US is sending vice president JD Vance, special envoy Steve Witkoff and Jared Kushner to lead negotiations for a lasting peace with Iran, although Iranian parliamentary speaker Mohammad Bagher Ghalibaf said there had already been breaches of the ceasefire.
The kiwi dollar gave up some of its gains against the greenback, spurred on by the Reserve Bank’s comments that it won’t hesitate to act if inflation beds in, with ASB Bank and Westpac NZ economists picking a hike in September, and Australian futures are pointing to a pullback when trading opens across the Tasman today.
And Sharesies’ latest quarterly index showed investor sentiment among its 1 million users cooled through the end of the March period during the escalation of hostilities in the Middle East.
Calm for now
US and European stock markets joined the global rally on two-week ceasefire in the Middle East, with Brent crude oil futures paring yesterday’s slide, up 0.7% at US$95.47 a barrel at 7am in Auckland, while the volatility index, known as Wall Street’s fear gauge, dropped 16% to 21.72
Still, the first day hasn’t been easy, with Israel continuing to mount attacks on Hezbollah targets in Lebanon and Iran’s speaker has claimed there have already been three breaches of the agreement. Peace talks will be held in Pakistan this weekend.
“Risk sentiment catapulted after the announcement of a two-week ceasefire in the Middle East, that paves the way for a reopening of the Strait of Hormuz,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “These headlines triggered a strong market reaction, with oil prices plunging and risk assets recovering, but there remain more questions than answers.”
The Dow Jones Industrial Average climbed 2.4% in late trading, led by manufacturers Sherwin-Williams and Caterpillar, and retailer Home Depot, amid optimism over the truce, while the S&P 500 was up 2.1% and the tech-heavy Nasdaq Composite climbed 2.3%.
Airlines and cruise operators were among those enjoying the biggest gains, having been beat up during the elevated oil prices. Delta Air Lines rose 4.1% in late trading as it kicked off earnings season, with its fuel cost up US$330 million in the quarter from a year earlier.
High flyers
Air New Zealand rallied 4.4% yesterday on the NZX, while ASX-listed Qantas Airways surged 9.4%.
US tech companies were broadly stronger, with Meta Platforms climbing 6.6% after releasing its latest artificial intelligence model.
Meanwhile, energy majors followed the slump in oil prices, while Exxon said the Middle East conflict cut 6% of its production through the March quarter.
Shell and BP were among the losers in London, while Exxon and Chevron were among decliners on Wall Street.
Still, stocks rallied hard in Europe, with the UK’s FTSE 100 up 2.5%, Germany’s DAX jumping 5.1% and France’s CAC 40 advancing 4.5%.
The buoyant mood is set to take a breather in the antipodes, with Australian futures pointing to a 0.3% decline for the S&P/ASX 200 when trading opens across the Tasman, while the kiwi dollar dipped to 58.12 US cents at 7am from 58.34 cents yesterday.
ASB Bank and Westpac NZ economists both brought forward their expectations for a rate hike in September by the Reserve Bank after yesterday’s decision, when governor Anna Breman said monetary policymakers would act quickly if there were signs of inflation bedding in. BNZ economists were already predicting a September increase, and bond traders have fully priced in a hike by that meeting.
Meanwhile, the latest Sharesies index showed a wide range in investor confidence through the March quarter, tapering from a four-year high in February to end the period at 45 reading, unchanged from the end of the December quarter and falling in the balanced range.
