Wall St wavers as hopes for Iran ceasefire fade

Stocks on Wall Street wavered as oil prices nudged back above US$100 a barrel and a weak auction pushed yields on US bonds higher amid reports that a ground assault is an option for US President Donald Trump if a ceasefire can’t be brokered in the Middle East.

Big tech felt the decline most keenly with Salesforce, International Business Machines and Microsoft at the bottom of the Dow Jones Industrial Average’s leaderboard and the Nasdaq Composite falling faster than other major indices, while weaker carriers set a soft lead for Air New Zealand as United Airlines warned of higher airfares if jet fuel prices remain elevated.

Meanwhile, New Zealand-born livestock management firm Halter confirmed reports of a major capital raising at a US$2 billion valuation as the virtual fence maker prepares to expand its global frontier into the UK and Ireland.

And local retailer KMD Brands will reveal its first-half result today, having brushed off an unpalatable proposal by a suitor for its Rip Curl division.

Ups and downs

Global markets remained volatile as optimism for a ceasefire in the Middle East evaporated after the Wall Street Journal reported the White House is weighing up whether to send a ground force into Iran if a deal can’ t be brokered.

Brent crude oil futures increased 0.4% to US$100.36 a barrel at 7am in Auckland, while the Polymarket prediction market is pricing in a 44% chance of a peace deal by the end of April.

Stock markets on Wall Street were generally softer, with the S&P 500 down 0.2% and the Nasdaq falling 0.7%, while the Dow was largely flat.

“Following yesterday’s short-lived recovery in risk assets, markets have traded with a more cautious tone, as the news coming out of the Middle East still seems to be mostly bad,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Iran is still very much in control of the Strait of Hormuz, closing it to almost everyone and charging a $2 million fee on a case-by-case basis to access the strait, something it is looking to do on a more permanent basis.”

The kiwi dollar dropped to 58.05 US cents at 7am in Auckland from 58.33 cents yesterday, with the greenback buoyed by rising US bond yields after a soft two-year treasury auction. The yield on 10-year US treasuries rose 3 basis points to 4.41%.

Tech stocks were among those at the bottom of the Dow’s leaderboard, with the Magnificent 7 megacap stocks broadly weaker, while Apple and Tesla advanced after the electric vehicle maker reported its first monthly increase in European sales in more than a year.

Still hungry

Still, private investors’ continue to have an appetite to spend, with agtech firm Halter raising US$220 million at a US$2 billion valuation to fuel its expansion into the UK and Ireland and look further afield in its global push.

Airlines were weaker, with United declining after chief executive Scott Kirby said ticket prices might have to rise by 20% if jet fuel prices remain elevated. Meanwhile, Qantas Airways is cutting 12% of subsidiary Jetstar’s New Zealand flights, following Air NZ’s move to shrink its schedule.

Stock markets across the Atlantic were mixed, with the UK’s FTSE 100 up 0.7% and France’s CAC 40 gaining 0.2%, while Germany’s DAX dipped 0.1%, led lower by SAP.

Australian futures are pointing to a 0.5% gain for the resources-heavy S&P/ASX 200 index, while New Zealand’s S&P/NZX 50 index starts the day near a seven-month low when the local bourse was one of the laggards during the Asian trading session.

Reserve Bank governor Anna Breman yesterday outlined the tension of rising prices and slowing growth facing the central bank from the Middle East energy shock, playing down a kneejerk response as policymakers gauge whether the conflict is fuelling broader inflationary pressures.

Bond traders pared back their expectations for the Reserve Bank’s response, cutting 10 basis points from their predicted rate hike track to 78 basis points by the end of the year.

Reserve Bank chief economist Paul Conway will deliver a speech on purchasing power and the real cost of living in New Zealand today, and the central bank will also publish mortgage data for February.

KMD Brands is poised to report its first-half result today, having signalled upbeat sales growth in early February. The retailer played down an advance by Stokehouse International to spin out its Rip Curl surf business, saying it wouldn’t have delivered value for shareholders, and is reportedly planning to shore up its balance sheet at a time when the shares are trading near an all-time low.

Reporting by Paul McBeth. Image from Sunira Moses on Unsplash.