ASX opens sharply lower as mining stocks tumble; Oil prices climb

The Australian sharemarket fell sharply in early trade, following a selloff on Wall Street and other markets around the world as oil prices continued to advance on worries about the widening war with Iran.

The S&P/ASX 200 slid 153 points, or 1.7 per cent, to 8924.30 as of 10.50am AEDT, plunging below the 9000 mark. All 11 industry sectors were in the red bar technology, with a 4 per cent plunge in mining stocks leading the way down. The morning’s losses come after the ASX lost 1.3 per cent on Tuesday. The Australian dollar was trading at US70.39¢ at 10.52am AEDT.

It’s an ugly morning for the nation’s mining heavyweight amid rising concerns about the fallout of the Iran war on global growth. BHP, the world’s biggest miner, slumped 3.8 per cent. Rio Tinto fell 1.7 per cent and Fortescue Metals lost 3.2 per cent.

Gold stocks also lost their shine, after bullion prices fell 3.5 per cent overnight to settle at $US5123.70 per ounce. US bond yields jumped overnight amid concerns that rising energy costs due to the war will make inflation even worse, and lead to higher interest rates. When sovereign bonds such as US Treasurys pay more in interest, they can undercut the price of gold, which pays its investors nothing. Gold’s slump overnight came after a strong run that had taken it above $US5300.

Gold miners Northern Star plunged 7 per cent, Evolution Mining lost 6.9 per cent and Newmont Mining slumped 7.4 per cent.

The other key sector for the ASX, financials – which make up more than a third of the entire market – were also lower, with all big four banks down in early trade. Commonwealth Bank slipped 0.4 per cent, National Australia Bank dropped 0.5 per cent, Westpac shed 0.8 per cent and ANZ Bank fell 1.4 per cent. “Millionaires’ factory” Macquarie dropped 1.3 per cent.

Airline stocks were down for a third day. Qantas fell 0.9 per cent and major Qatar Airways code-share partner Virgin Australia lost 1.3 per cent, as the escalating conflict sent fuel prices surging and continued to disrupt flights via the region.

Endeavour lost 3.8 per cent after the owner of the Dan Murphy’s and BWS bottle shops said its first-half profit fell 17.1 per cent to $247 million in what it said was “a challenging market”. The company cut its dividend by 13.6 per cent to 10.8¢ a share.

Bucking the downwards trend were tech stocks, which had been sold down in the previous session amid concerns about interest rates. WiseTech Global, the nation’s biggest tech stock, was up 1.4 per cent. Software maker Xero rose 1.9 per cent and family tracking app Life 360 clawed back some of its heavy losses from Tuesday with a 1.7 per cent gain. The stock had slumped 17.9 per cent in the previous session after reporting its results, with investors underwhelmed by its profit margins.

On Wall Street, the big moves that rocked US shares in early trade eased substantially as the session went on overnight. By the end of trading, the S&P 500 had sunk 0.9 per cent. That would be a solid loss on a typical day, but the index had been down as much as 2.5 per cent because of concerns the war may do more sustained damage to the global economy than feared.

The Dow Jones dropped 403 points, or 0.8 per cent, after plunging more than 1200 points earlier in the day. The Nasdaq composite pared its loss to 1 per cent.

It was just a day ago that Wall Street had opened with sharp losses, only to recover all of them and end the day with slight gains. Helping to drive that rebound was a record showing that past wars and conflicts in the Middle East have not usually meant long-term pain for US stocks.

But that was with the caveat that oil prices did not jump too high, like above $US100 per barrel. On Tuesday, oil prices rose again and raised more alarms. The price for a barrel of Brent crude, the international standard, briefly leaped above $US84.

The jump lessened through the day, though, which helped moderate the losses for stocks. Brent settled at $US81.40, up 4.7 per cent. That’s up from below $US70 less than a week ago. A barrel of benchmark US crude rose 4.7 per cent to $US74.56.

The moves showed oil prices, and how much they’re set to worsen inflation, are among the central fears for investors. More expensive fuel will mean less money for households to spend. It would also raise expenses for companies worldwide, which would likewise hurt their profits. And corporate profits are the lifeblood of stock markets.

The latest climb for oil prices came after Iran struck the US Embassy in Saudi Arabia, part of a widening of targets that also includes areas critical to the world’s oil and natural gas production. Worries are particularly high about the Strait of Hormuz off the coast of Iran, a narrow passageway where roughly a fifth of the world’s oil passes.

“The Strait of Hormuz is closed,” declared Iranian Brigadier General Ebrahim Jabbari, an adviser to the paramilitary Revolutionary Guard, vowing that any ships that passed through it would be set on fire.

The fears about oil prices ebbed a bit later in the day as President Donald Trump said the US Navy could begin escorting tankers through the strait, “if necessary,” to “ensure the FREE FLOW of ENERGY to the WORLD.”

Making things uncertain for markets are rising questions about how long this war may continue.

A major attack by the United States and Israel has already killed Iranian Supreme Leader Ayatollah Ali Khamenei, but Trump said late on Monday night on his social media network, “Wars can be fought ‘forever,’ and very successfully” with the supply of munitions that the United States possesses.

Some professional investors said again that this doesn’t look like the beginning of a long-term down market and that stocks could rebound if the war doesn’t last that long, though they acknowledge it could take a while for that to become clear, and the swings for markets show how uncertain things are.

On Wall Street, nearly three out of every four stocks within the S&P 500 dropped. Unlike a day before, influential Big Tech stocks weren’t able to prop up indexes, and Nvidia fell 1.3 per cent.

Among the winners on Wall Street was Target, which rose 6.7 per cent after the retailer reported a better profit for the latest quarter than analysts expected.

With AP

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.