Wall Street eyes records on prospect of Strait of Hormuz reopening

Share markets in Europe and the US rallied as oil prices continued to decline amid mounting optimism the Strait of Hormuz will reopen in the coming days after US Treasury secretary Scott Bessent said a deal with Iran could come today or tomorrow.

Corporate earnings continued to deliver strong results with Palantir Technologies surging after its “otherworldly” result and Caterpillar beating expectations, while Wegovy-maker Novo Nordisk still disappointed Wall Street despite posting stronger profit than forecast.

SpaceX rallied ahead of reporting its first quarterly result in what will also unlock the first tranche of locked up shares of the space and artificial intelligence conglomerate.

And Statistics New Zealand’s June quarter labour data are expected to show slowing jobs growth in the period and a small lift in the unemployment rate, while milk prices nudged higher in the latest Global Dairy Trade auction.

Familiar story

Brent crude oil futures for October fell 5% to US$79.58 a barrel after a spokesman for Qatar’s foreign ministry said a draft resolution between the US and Iran to de-escalate the Middle East conflict and reopen the Strait of Hormuz had been shared between partners, and Treasury secretary Bessent told CNBC a deal could come in the next day or so.

Elevated oil prices underpinned rising profits for BP and Saudi Aramco, despite the wider disruptions to the major shipping channel for oil.

The cooling tensions in the Middle East spurred gains on European and US stock markets, with the Dow Jones Industrial Average up 2% in late trading, with strong corporate earnings adding to the positive trading session. The tech-heavy Nasdaq Composite climbed 2.8% and the S&P 500 was up 2%.

Palantir surged 30% after almost doubling its quarterly revenue in what chief executive Alex Karp described as an “otherworldly” result, while Caterpillar led the Dow higher, up 7.1%, as the heavy machinery maker beat forecasts and raised its sales outlook, soothing fears that demand for power-generation equipment used for data centres was starting to ease.

McDonald’s nudged higher as the fast-food operator hired a new US leader to revive sluggish domestic sales, while furniture maker Wayfair jumped 29% after reporting a recovery in American demand.

Danish drugmaker Novo Nordisk beat earnings forecasts, but its US-traded shares sank with investors disappointed by sales of its Wegovy weight-loss pill.

SpaceX gained 8.9% to US$124.68 ahead of its maiden quarterly result, which will also trigger the first release of shares locked up in the initial public offering. Advanced Micro Devices is also due to report after the bell.

Meanwhile, Bloomberg reported that Anthropic struck a US$10 billion deal for computing capacity from Nvidia-backed startup Volta Infra Holdings, and New Jersey state filed papers suing Amazon, accusing the online retailer of abusing its market power over independent delivery drivers in the state. Amazon denied the claim.

Across the Atlantic, the UK’s FTSE 100 index gained 0.2%, while Germany’s DAX advanced 0.8% and France’s CAC 40 rose 0.6%.

Let’s stick together

Germany’s Bayer advanced as chief executive Bill Anderson ruled out breaking up the group for now, saying there was still work to do before it can consider its options. The conglomerate concentrated its US glyphosate operations into a new arm, Ruveon, earlier this year.

And Japan’s Toyota declined yesterday despite raising its annual earnings forecast as a weak yen spurred international sales, and a smaller impact from the Middle East conflict helped boost the automaker’s quarterly profit.

The kiwi rose to 92.91 yen at 7am in Auckland from 92.43 yen yesterday as the impact of last week’s intervention by US and Japan authorities continued to wash through.

“The broad consensus is that intervention provides a short-term floor for the yen but is unlikely to engineer a lasting trend reversal,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The threat of further intervention is seen as limiting near-term downside for the yen, but structural negative forces, namely the BoJ’s ultra-easy policy stance, remain firmly in place,” he said, referring to the Bank of Japan.

That upbeat mood is set to flow through to Australian and New Zealand markets, with futures pointing to a 0.2% gain for the S&P/ASX 200 index when trading opens across the Tasman. The kiwi dollar rose to 58.94 US cents from 58.68 cents.

Greg Boland, Moomoo market strategy consultant, said New Zealand’s S&P/NZX 50 index was positioned to extend its gains, with Wall Street’s rally and easing inflation pressures providing a supportive backdrop.

“Local investors will also be watching today's New Zealand labour market data, while tonight's SpaceX and AMD earnings could set the tone for global technology stocks for the remainder of the week,” Boland said.

Stats NZ figures today are expected to show the unemployment rate rose to 5.4% in the June quarter from 5.3% in the prior period, with economists predicting jobs growth slowed to 0.1% quarterly pace.

The GDT price index rose 0.1% with an average winning price of US$3,778 a tonne at the latest GDT auction. Whole milk prices increased 0.2% to US$3,483/tonne, while prices for milk fats and butter were softer.

Climate change minister Simon Watts said the government would maintain current emissions trading scheme unit settings after a consultation, extending the current auction floor price, cost containment reserve price and current reserve volume until 2031.

And on the NZX, Black Pearl Group will hold a virtual annual meeting today.

Reporting by Paul McBeth. Image from Robb Miller on Unsplash.