STAN CHOE
The Australian sharemarket is expected to rally on opening, and follow global markets higher, as oil prices ease and hopes climb that the United States and Iran may try again on talks to end their war and avoid a worst-case scenario for the global economy.
Futures at 5.30am AEST point to a 48 point gain, or a 0.54 per cent increase for the local bourse, which will add to a similar advance on Tuesday. The Australian dollar is trading around US71.28¢.
Overnight in the US stock markets have traded higher, near an all-time high.
The S&P 500 added 1.1 per cent to its leap from the day before, which had erased the last of its losses since the United States and Israel launched attacks on Iran in late February. It’s just 0.2 per cent below its record set in January and on track for its ninth gain in the last 10 days.
The Dow Jones Industrial Average was up 315 points, or 0.7 per cent, as of 3:12pm Eastern time, and the Nasdaq composite was 1.8 per cent higher.
They followed gains for stock markets worldwide as Pakistan said it was trying to bring the United States and Iran together for more talks. Such prospects also helped lower the price of oil, whose production and transportation has been snarled by the fighting.
Indexes rose across much of Europe and Asia are higher. South Korea’s Kospi jumped 2.7 per cent, and Japan’s Nikkei 225 rose 2.4 per cent for two of the bigger gains.
If talks succeed and the Iran war ends up being only a temporary setback for the global economy, rather than a new normal of very high oil prices and inflation, financial markets can turn their attention back to rising profits for companies and growth for economies. Those positives had stock markets worldwide largely doing well before the war began.
Brent crude oil, the international standard, has gone from roughly $US70 per barrel before the war in late February to more than $US119 at times when worries about the war hit their heights. Brent for June delivery fell 4.6 per cent to $US94.79 per barrel Tuesday.
A barrel of US crude oil for May delivery dropped 7.9 per cent to $US91.28.
To be sure, hope has often quickly swung into doubt in financial markets since the war began, which has caused extreme and sudden reversals. Much of the stress has been due to the Strait of Hormuz, a narrow waterway that’s the main avenue for crude oil produced in the Persian Gulf area to reach customers worldwide. Blockages there have kept oil off the global market, which has in turn driven up its price.
And that has meant a blast of higher inflation. In the United States, inflation at the wholesale level accelerated to 4 per cent in March from 3.4 per cent the month before, according to the latest data released Tuesday. That was actually better than the 4.6 per cent rate economists expected, but it could filter down to US households if businesses fully pass on the increases.
The effect is worldwide. Global inflation this year looks set to accelerate to 4.4 per cent from 4.1 per cent in 2025, according to the International Monetary Fund, which had earlier thought inflation would slow to 3.8 per cent.
The IMF on Tuesday also downgraded its forecast for global economic growth to 3.1 per cent this year from the 3.3 per cent it had forecast in January.
On Wall Street, strong profit reports from several companies and expectations for more helped make up for such worries. At their heart, stock prices tend to follow the path of corporate profits over the long term, and analysts are forecasting S&P 500 companies will deliver solid growth of nearly 13 per cent for the most recent quarter, according to FactSet.
So much optimism is in the strength of corporate America’s earnings power that analysts have even raised their estimates for S&P 500 profit over the first six months of the year since the end of February, according to Morgan Stanley.
BlackRock gained 3.3 per cent, and Citigroup rose 3.2 per cent Tuesday after the financial companies reported stronger profit and revenue for the latest quarter than analysts expected.
JPMorgan Chase also delivered a better-than-expected quarter, but its stock dipped 0.5 per cent as CEO Jamie Dimon said bank officials cannot predict how the “increasingly complex set of risks” will play out given so much uncertainty.
Amazon climbed 3.6 per cent after saying it would buy Globalstar, a mobile satellite services company, for $US90 per share in either cash or Amazon stock. Globalstar jumped 9.7 per cent.
Software companies also rallied for a second day, recovering more of their sharp losses from earlier in the year. That in turn helped private-credit companies rebound. These companies have lent money to software businesses and others that may be under threat from AI, and they’ve seen investors rush to try to pull their money recently.
Blue Owl Capital rose 8.1 per cent to trim its loss for the year so far to 38.9 per cent. Ares Management climbed 5.5 per cent, and Apollo Global Management rose 4.6 per cent.
In the bond market, Treasury yields eased as the fall for oil prices took some of the pressure off inflation. The yield on the 10-year Treasury fell to 4.25 per cent from 4.30 per cent late Monday.
