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Australian stocks have their worst day in two weeks due to the Middle East air war
Tuesday saw Australian shares have their worst session in more than two weeks, as an escalating Middle East air war dampened risk sentiment and raised inflation fears. The S&P/ASX 200 closed at 9,077.30 down 1.3%, its lowest level since February 13th. It was flat on Monday. Israel increased its offensive with new strikes against Iran and Hezbollah. Meanwhile, Iran fired missiles and drones towards?Israel, Gulf States and even a British base in Cyprus. This raised investor concerns over a prolonged conflict. "Now that the reporting season is over in Australia, investors are focusing on the Middle East tensions and the possible ramifications of an extended disruption," said Craig Sidney. The longer the Middle East crisis continues, the higher the oil prices should be, which could lead to an increase in inflation. The Reserve Bank of Australia's (RBA) Governor warned that the rate increase was still on the table if inflation expectations were deemed to be drifting away from anchor. Sidney stated that the RBA could refrain from immediate increases in rates due to the uncertainty of the situation, despite the short-term pressures on inflation. The?bourse saw the miners lead the way, with a decline of 3.1%, their worst session in nearly a month, and gold stocks dropping 3%. Sidney said that profit-taking was the main reason for these movements. BHP and Northern Star Resources, both heavyweights, fell 2.6% and 3.2% respectively. Banks were down?0.1%, but Commonwealth Bank of Australia, Australia's largest lender, was up 0.3%. Meanwhile, energy companies rose 1.4%, their highest close in 18 months, as oil prices surged. Investors will be watching for the Gross Domestic Product data of the country due on Wednesday. New Zealand's S&P/NZX50 index closed 0.3% lower, at 13,620.21. (Reporting by Kumar Tanishk in Bengaluru; Editing by Harikrishnan Nair)
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The chief economist of the ECB warns that inflation in the Eurozone could rise due to a prolonged Iran war
In an interview published on Tuesday, Philip 'Lane, Chief Economist at the European Central Bank (ECB), said that a prolonged conflict in the Middle East could lead to a significant spike in inflation in the euro zone and reduce economic growth. The U.S.-Israeli war against Iran intensified on Monday with no end in site as Israel attacked Lebanon, and Iran continued its attacks on Gulf States, driving up oil prices over 10%. Lane explained that "directly, an increase in energy prices puts upward pressures on inflation in the short-term and would be negative for economic activity." He said that "the breadth and length of the conflict will determine the scale of impact and implications?for the medium-term inflation," adding that the ECB would monitor the situation. Lane explained that previous sensitivity analyses by the ECB had shown that a war of this kind would result in a?substantial spike? in energy-driven prices and a?sharp fall? in output if energy supplies were to continue to drop out of the area. Separate analysis from the ECB in December suggests that a permanent spike in oil prices of this magnitude would increase?inflation to 0.5 percentage points and reduce growth by 0.1 percent. The euro zone inflation rate is currently 1.7%. This is below the bank's 2% goal. A small increase in prices?is unlikely?to trigger policy action. The ECB tends to ignore energy-induced 'volatility' in prices, as long as the fluctuations don't impact on longer-term expectations or seep through into underlying inflation via a second-round effect. Market-based 'longer-term expectations of inflation are not much different at this time. And markets expect the ECB to maintain its 2% deposit rate throughout the year. Gursimran K. Kaur and Balazs Koranyi report from Bengaluru, and Tom Hogue and Raju G. Gopalakrishnan edit the story.
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Wall Street Journal, March 3,
These are the most popular?stories from the Wall Street Journal. The Wall Street Journal has not verified these stories and cannot vouch for their accuracy. IAC has agreed to sell Care.com for $320m to the private equity firm Pacific Avenue Capital Partners, marking an eviction of this online marketplace. Ayar Labs is a chip company that develops co-packaged opticals. It raised $500 million during a funding round, which valued it at $3.8 Billion. A consortium of investors, including EQT and BlackRock's Global Infrastructure Partners, agreed to acquire AES at a price of $10.7 billion. The AI data center construction is fueling the surge in demand for electricity. Elliott Investment Management agreed to make a "sweetened" bid for Toyota Industries, which values the company at nearly $40 billion. Fitch Ratings has lowered Paramount's credit rating from BBB- to BB+ due to the proposed $81 billion purchase of Warner Bros. SoftBank PayPay will?target a valuation up to $13.4 Billion in its U.S. initial public offering. The Japanese company is pushing ahead despite volatile markets in what could be one of the largest U.S. listings for a Japanese company.
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Sources say that global aluminium producers have paused premium offers for Japan Q2 due to the uncertainty in the Middle East.
Four sources who were involved in quarterly pricing discussions said that global aluminium producers had pulled their initial premium offers for Japanese buyers or let them expire as they feared the threat posed by a escalating Middle East war to cargoes passing through the Strait of Hormuz. Japan is a major importer of metals in Asia, and the premiums it pays for primary metals shipments over the London Metal Exchange cash price each quarter set the benchmark for this region. South32 and Rio Tinto both offered Japanese buyers premiums for April-June shipments of $250 and $220 per metric ton, respectively, which is a 13% to 28.8% increase from the current quarter. Sources say that South32's offer expired before the conflict escalated on Friday. Rio retracted its offer?on a Monday saying it had to assess potential disruptions. Four sources have spoken on condition of anonymity, as the subject is sensitive. Rio Tinto has declined to comment. Even a short term shortage of aluminium could cause regional premiums to rise for months if the benchmark is raised. A source from a producer stated that "production of aluminum in the Middle East, including the United Arab Emirates, Bahrain and Kuwait, appears to be unaffected." Source: "Should the Strait of Hormuz remain closed, shipments may be delayed and could potentially lead to a tightening of global supply including in Asia", the source said. Source: "We're monitoring the situation, but our plans to set the premium for the April-June quarterly quarter by the end March remain unchanged,"?the source stated, adding that the manufacturer plans to make a new offering as soon as they can. A second source from a trading firm said that even if the Strait remained closed, there were alternative shipping routes available to the UAE. Other suppliers in Asia could also be contacted for alternative supplies. He added that if hostilities continue, alternative measures will be needed. While obtaining primary metals may be possible, finding substitutes for products with added value is more difficult. In 2025, Japan will import about 20% of its primary aluminium from the Middle East. For the period from January to February, Japanese buyers have agreed to pay $195 per ton as a premium. The increase in demand is due to fears of a tightening supply. Last week, Japanese buyers and producers started quarterly pricing talks. These are expected to continue in the coming weeks. (Reporting from Yuka Obayashi, Tokyo; Additional reporting from Melanie Burton in Melbourne; editing by Clarence Fernandez).
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Iran conflict disrupts China’s Middle East steel imports
Analysts and traders said that some Chinese steel exporters had'stopped offering to Middle East customers as the conflict with Iran chokes the shipping through the Straits of Hormuz. Shipping through the Strait of Hormuz, between Iran and Oman, has come to a halt as a result of the conflict with Iran. Iran has retaliated by attacking vessels in the region as a retaliation for U.S. The straits not only handle a significant portion of oil trade but also a major route for China's exports of steel to the Gulf. This region has grown to be its second biggest market and accounted for 16% of China's exports in the past year, as other countries erected trade barriers. According to reports by four Chinese steel consultancies and a steel dealer, some 'Chinese steelmakers' have stopped shipping new cargoes into the Gulf due to disruptions in shipping. A steel trader in East China said, "You have no choice. Ship companies are not currently assigning vessels near the Persian Gulf markets." He spoke on condition of anonymity as he wasn't authorised to talk to the media. "Without ships, you don't have a shipping guide;?and, without both, it is hard for us to make an offering," said the trader, who?said that they were closely watching developments in the area. In spite of growing protectionism on traditional markets like Vietnam and South Korea, the pivot towards the Middle East has been a major factor in the surprising resilience of Chinese exports to these countries over the past three years. Analysts at Shanghai Metals Market stated in a Monday note that China's exports of steel to countries in the Middle East will likely plummet in the short-term, increasing domestic supply pressures and lowering prices. (Reporting and editing by Amy Lv, Lewis Jackson)
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PMI data shows that Saudi Arabia's growth in non-oil businesses slowed down in February.
A'survey' released on Tuesday showed that the growth in Saudi Arabia’s non-oil sector slowed in February and reached its lowest level in nine months as competition pressures weighed on expansion. However, demand remained high. The Riyad Bank Saudi Arabia Purchasing managers' Index (PMI), which is adjusted for season, fell to 56.1 from 56.3 in January. However, it remained above the threshold of 50 that distinguishes between growth and contraction. Naif Al Ghaith is the chief economist at Riyad bank. He said, "This performance has been driven by robust domestic consumption and a steady flow of new project approvals." Saudi Arabia's plans for economic diversification include a major objective: the expansion of non-oil sectors. Iran's retaliatory attacks across the Gulf have caused the most widespread business disruption since the COVID-19 Pandemic. They forced airport closures, stopped port operations, and sent shockwaves to financial markets. The new orders subindex in the PMI survey for February remained at 61.8. This is the same as the previous month, which indicates strong demand. Businesses continue to report strong output and an increase in employment. According to the survey, the rate of employment growth reached a four-month-high, driven by a combination of?increased revenue and a building-up of backlogs. The rate of?staff cost inflation reached its highest level since the survey began in august 2009. JPMorgan cut its non-oil 2026 growth forecast for the Gulf region?by?0.3 percentage point and by 0.2 percentage point for Saudi Arabia, on Monday. The bank warned that these figures are preliminary and subject to high uncertainties. Toby Chopra, Toby Chopra (Reporting)
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Stocks fall as inflation fears fuelled by Middle East air war increase
Investors weighed the impact of U.S.-Israeli strikes on Iran and global economic conditions on the energy market and stock prices, and the dollar strengthened on Tuesday. MSCI's broadest?Asia-Pacific share index outside Japan dropped 1.5%, extending?losses a second time. The drop was led by as much as?4.1% in Korean shares. Tokyo's Nikkei fell 2.3%, and S&P500 e-minis futures dropped 0.6%. Rupal Agarwal is Asia Quant Strategist at Bernstein, Singapore. "Economic uncertainty was already high and with the Iran conflict the geopolitical risks are expected to increase too," she said. The last time these two factors spiked together was in 2022, during the Russia-Ukraine crisis. This didn't go well for Asian markets. Wall Street has stabilised following a volatile session Monday. The S&P 500 recovered from an initial selloff and closed flat, while the Nasdaq Composite rose 0.4% after investors bought the dip. U.S. President Donald Trump tried to justify an open-ended, broad war against Iran by saying that the campaign had exceeded expectations. An official of Iran's Revolutionary Guards announced on Monday that there is no end in sight to the hostilities and that any ship trying pass the Strait of Hormuz will be fired upon. The threat immediately impacted the hiring of a supertanker for the shipping of oil from the Middle East into China, pushing up the cost to a new record of over $400,000 aday, according to LSEG. Brent crude futures rose another 2% on Tuesday to $79.22. On the natural gas market, European and Asian benchmark LNG prices jumped by about 40% on Monday. Working through the Risk Scenarios The surge in energy costs could increase the cost of Asian companies, and impact their profits and stocks. Goldman Sachs analysts wrote in a report that a 20% increase in Brent oil could result in regional earnings falling by 2%, with large intraregional variations. However, this is dependent on the length of the conflict. They said that spikes in geopolitical risks tend to have negative effects on the short term, but they dissipate with time. The current increase in geopolitical risks coincides with a regional vulnerability to correction. Energy prices are on the rise, complicating the Federal Reserve's attempts to control inflation. Policymakers have already shown signs of division over the impact artificial intelligence will have on the U.S. Economy. Secretary of State Rubio announced on Monday that the U.S. will take steps to reduce rising energy costs due to the spike in oil prices caused by the conflict with Iran. ISM manufacturing data, released on Monday, showed that U.S. activity increased steadily in February. However, a measure of factory gate price soared to a nearly 3-1/2-year-high amid tariffs. This highlighted the upward pressure on inflation, even before U.S. led attacks on Iran. FedWatch, a tool of the CME Group, shows that Fed funds futures price an implied 97.5% chance that the U.S. Central Bank will remain on hold after its next two-day?meeting on March 18. The odds of the June hold, which were previously less than 50%, increased on Monday to?slightly more than a coin flip. The U.S. Dollar Index, which measures the strength of the greenback against a basket containing six major counterparts, was close to a six-week peak at 98.499, as the currency recovered some of its appeal as a haven. The yield of the 10-year Treasury Bond in the United States was down 1.2 basis point at 4.036%. In a recent research note, DBS analysts wrote that "current market dynamics only show a mild risk off tone. This is not enough to sustain a strong?bid for U.S. Treasury Bonds or to push the Fed to make faster cuts." They added that "the conflict raises the spectre stagflation." While energy prices are not at the same levels as they were during the beginning of the Russia-Ukraine war in 2022 investors will likely be watching closely the duration and extent to which energy supplies will be interrupted. Gold rose 0.6% to $5,358.44. Bitcoin fell 1.5% to $68,399.26 while ether dropped 1.5% to $2,013.07. (Reporting and editing by Gregor Stuart Hunter)
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Iron ore prices fluctuate as investors weigh up rising freight costs versus falling demand
Iron ore prices slid on Tuesday as investors weighed the rising freight costs caused by a widening conflict in Iran that impeded shipments through the 'Strait of Hormuz, against the falling demand due to production restrictions among Chinese steelmakers. Iranian media reported that a senior Iranian Revolutionary Guards official stated on Monday that the Strait of Hormuz was closed and Iran would fire on any ships trying to pass. This sent oil prices and shipping costs soaring. As of 0212 GMT, the most-traded contract for iron ore on China's Dalian Commodity Exchange was flat at 748.5 Yuan ($108.73). As of 0202 GMT, the benchmark April iron ore price on Singapore Exchange fell 0.41% to $98.85 per ton. Tomas Gutierrez is the head of data for Kallanish Commodities. Analysts said that rising freight costs increased the cost of iron ore, which in turn boosted ore prices. Hot metal production, which is a good indicator of iron ore consumption, will likely fall because China's annual parliament meeting begins on March 5. This should keep the price of ore from rising. Some Chinese steelmills were required to reduce output during the important meeting in order to ensure cleaner air. The port's iron ore inventory is at a record high. Also, the prices of other products have been reduced. Coking coal was down by 0.18%, while coke was up 0.03%. The benchmarks for steel on the Shanghai Futures Exchange have lost ground. Rebar and wire rod fell 0.42%. Hot-rolled coils dropped 0.4% and stainless steel lost 0.49%. $1 = 6.8840 Chinese Yuan (Reporting and editing by Amy Lv, Lewis Jackson)
MORNING BID EUROPE - Trump's 'Whatever it takes' pledge deepens the stock selloff and lifts oil prices
Gregor Stuart Hunter gives us a look at what the future holds for European and global markets.
The global markets have been 'caught up in a heightened state of uncertainty, as U.S. president Donald Trump has sought to defend an open-ended, broad war against Iran. This has smashed stocks yet again and pushed energy prices higher.
The markets did not seem to be able to grasp that?Trump had said the U.S. would "do whatever it takes" in order for them achieve their military objectives in Iran.
The safe-haven status that Gulf cities such as Dubai enjoy has been questioned like never before.
This highlights the risks associated with the expanding conflict not only for the Middle East, but also for the global economy. It could have a wide range of consequences, including an increase in inflation, and the impact on investor confidence.
Crude oil prices are continuing to rise after Iran threatened to shoot at ships trying to cross the Strait of Hormuz. Brent crude increased 2.5% to $79,64 after the 'cost of hiring a Supertanker - to ship oil from Middle East to China - surged to a record high of more than $400,000.
Secretary of State Rubio announced that the U.S. would take steps to reduce rising energy prices. Plans will be revealed later Tuesday.
MSCI's broadest Asia-Pacific share index outside Japan fell 2.3%. This was led by a drop as high as 6.5% on Korean shares. S&P 500 futures dropped 0.8%, and Nasdaq futures declined 0.9%.
The U.S. Dollar Index, which measures greenback strength against a basket of six major counterparts, held at close to a 6-week high of 98.622, as the Iran'strikes rattled market nerves, and the currency gained some of its appeal as a safe-haven.
Satsuki Katayama, the Japanese Finance Minister, warned that the market was on notice and suggested that the possibility of intervention to protect the yen (which has been under greater selling pressure due to the Middle East crisis) remained.
Gold rose 0.6% to $5359.93, while the yield on U.S. Treasury bonds grew by 0.4 basis points.
Early European?trades saw pan-regional futures down by 0.9%. German DAX Futures dropped 1% and FTSE Futures fell 0.3%.
The following are key developments that may influence the markets on Tuesday.
Earnings of the company
CrowdStrike is available at Best Buy, Target and Sea
Economic Data
Euro Zone HICP flash for February
Debt auctions
Germany: 5-year government debt
(source: Reuters)