Staff writers
Updated ,first published
The Australian sharemarket fell on Monday after another poor showing by the bourse’s tech stocks and investors got the jitters following the US and Iran’s failure to strike a peace deal, which sent oil prices soaring again and reignited fears for the global economy.
The S&P/ASX 200 fell 34.60 points, or 0.4 per cent, to 8926 on Monday. Eight of its 11 industry sectors declined. The ASX had gained 4.4 per cent last week, its best week since late 2022, amid hopes the war might be coming to an end.
Energy stocks were a rare bright spot on the exchange. Woodside was up 2.6 per cent and Santos rose by 1.6 per cent. Petrol refiners Ampol and Viva also performed strongly, rising by 2.65 per cent and 3.6 per cent respectively, as investors expected more volatility in fuel prices.
“Trump’s move to announce a naval blockade of the Strait of Hormuz is set to reignite risk aversion this week,” Elias Haddad, the global head of markets strategy at Wall Street investment firm Brown Brothers Harriman & Co, said before the start of trading.
“Crude oil prices are likely to retrace some of last week’s ceasefire-induced decline, while the potential for an increase in tensions with China, a significant buyer of Iranian oil, can add to market unease.”
Tech stocks slipped. Software makers WiseTech Global and Xero were down 1.2 per cent and 1.5 per cent, respectively. Family member tracking app Life 360 dived 8 per cent.
Gold miners weighed down the materials sector and gold prices tumbled by as much as 2.2 per cent on mounting concerns about inflation if Trump’s plans to blockade the important oil shipping route deepen the global energy supply shock. Northern Star Resources lost 2 per cent and Evolution Mining dropped 2.4 per cent.
The Aussie dollar was trading at US70.4¢ at 4.45pm.
Brambles fell 2 per cent after the Federal Court on Friday found the logistics giant had failed to keep investors informed about its true financial position, which exposed the company to compensation claims.
Dairy company A2 Milk plummeted 13 per cent after the infant formula maker slashed its sales and earnings forecasts, citing supply chain disruptions – partly linked to the Iran war – that have slowed shipments to China.
Oil futures had ended last week 30 per cent above where they were before the war, while traders are paying record amounts north of $US140 a barrel for real-world cargoes as they scramble for supplies.
Trump said the US would begin a full naval blockade of the strategic Strait of Hormuz and threatened to retaliate in the event of Iranian resistance, escalating a stand-off that has brought the waterway to a near standstill and disrupted global energy supplies.
The president’s announcement came hours after the US and Iran failed to reach a deal in direct talks in Pakistan, jeopardising hopes of turning a fragile ceasefire into a lasting end to a war that has claimed thousands of lives.
The negotiations collapsed because of differences over the nuclear issue, Trump said in a Truth Social posting on Sunday.
“Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz,” he said. “Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL!”
The failure of the US and Iran to reach a peace deal, along with Trump’s threats, leaves the ceasefire clinched last week in limbo. Trump said the US would interdict any vessel that had paid a toll to Iran for safe passage through Hormuz and that it would clear mines in the strait, through which about one-fifth of global oil and liquefied natural gas flowed before the war.
On Wall Street, the S&P 500 inched 0.1 per cent lower on Friday after a day of choppy trading as investors were waiting for the outcome of the peace talks. The Dow Jones Industrial Average fell 0.6 per cent and the Nasdaq composite rose 0.4 per cent.
The major indexes each notched a weekly gain for the second week in a row. They have been gaining ground this month amid optimism that the war with Iran could be heading toward a resolution.
The benchmark S&P 500 has erased most of its losses from March and is just 2.3 per cent short of its record high set in January. The market is still prone to big swings on developments around the war.
Oil prices have been behind many of the stock market’s sharp movements. They have risen sharply as shipping through the Strait of Hormuz essentially stalled since the war began. Brent crude oil has gone from about $US70 per barrel before the war in late February to more than $US119 at times.
The war in the Middle East was behind surging inflation in the US in March. The US government reported the biggest spike in inflation in four years as prices at the petrol bowser jumped. The inflation increase was just short of what economists expected.
Bond yields rose following the latest inflation update. The yield on the 10-year Treasury climbed to 4.32 per cent on Friday from 4.29 per cent late on Thursday.
Inflation has been a lingering concern for economists. Prices on a range of consumer goods and services are already stubbornly high, in part from the impact of extensive global tariffs. Higher petrol prices are immediately felt by drivers at the pump, but they could eventually raise prices on everything from food to airfare as companies pass along higher costs for shipping and fuel.
US consumer sentiment slumped 10.7 per cent in April, according to a closely watched monthly survey from the University of Michigan. The survey also shows that consumers are growing more worried about inflation. Year-ahead expectations surged to 4.8 per cent in April from 3.8 per cent in March.
Inflation remains a major concern for the US Federal Reserve, which has signalled more caution amid worries about inflation reheating. The rate of inflation remains above the central bank’s 2 per cent target. The threat of rising inflation could mean the central bank continues to hold interest rates steady. Several Fed officials have also said a rate hike might be needed if inflation doesn’t cool.
Lower interest rates help boost stocks and other investments by lowering borrowing costs. Interest rate cuts also risk worsening inflation.
Most companies in the S&P 500 lost ground on Friday. Healthcare and financial company stocks drove much of the decline. Eli Lilly fell 1.6 per cent and Charles Schwab closed 2.5 per cent lower. Technology stocks with hefty values helped offset losses elsewhere. Nvidia rose 2.6 per cent and Broadcom rose 4.7 per cent.
In other international markets, markets in Asia gained ground while markets in Europe were mixed.
With Bloomberg, AP
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