ASX inches higher as oil prices ease; ARN falls after firing Sandilands

The Australian sharemarket edged higher on Wednesday as oil prices eased and Wall Street rose for a second session, with investors’ focus turning towards the Federal Reserve’s upcoming interest rate decision. ARN Media fell after it sacked its controversial but ratings-leading radio host Kyle Sandilands.

The S&P/ASX 200 added 26.30 points, or 0.3 per cent, to 8640.60, with all sectors in the green bar healthcare. The gains come after the market rose 0.4 per cent on Tuesday even as Australia’s Reserve Bank raised interest rates for the second time this year, with the central bank’s split vote on the decision boosting speculation that further rate hikes may be far from certain.

The Australian dollar was up 0.2 per cent at US71.19¢ amid predictions the US central bank will keep rates in the world’s largest economy stable for now.

Australia’s biggest mining company, BHP, added 0.7 per cent after it announced that chief Mike Henry would stand down from his role after six years in charge, with BHP Americas chief Brandon Craig taking over in July. Among other iron ore heavyweights, Rio Tinto added 0.8 per cent and Fortescue lost 1.3 per cent. Gold miners were mixed, with Northern Star adding 1.4 per cent while Evolution Mining shed 0.6 per cent.

Woodside Energy finished flat after it announced that interim chief executive Liz Westcott had been appointed to the role on a permanent basis. Westcott has been leading the company since Meg O’Neill left for BP late last year. Santos added 0.3 per cent and refiner Ampol rose 1.3 per cent.

Having jumped overnight, oil prices eased during the session as Iraq signed a deal to resume exports via Turkey that avoid the Strait of Hormuz, and as the US stepped up efforts to force the reopening of the waterway. Brent fell below $US101 a barrel, after adding more than 3 per cent overnight, while West Texas Intermediate was near $US93. Iraq agreed with Kurdistan to resume oil exports through a pipeline in the semi-autonomous region that goes to Turkey’s Mediterranean port of Ceyhan.

Banking stocks ended mixed, with Commonwealth Bank up 0.6 per cent and Westpac inching up 0.1 per cent, while National Australia Bank dropped 0.5 per cent and ANZ Bank lost 1.1 per cent.

Macquarie shares rose 0.9 per cent after Reuters reported the bank has withdrawn from the bidding for a stake in Kuwait’s oil pipeline network worth up ​to $US7 billion ($9.9 billion), pulling out of the Gulf deal due to the Iran war. The newswire was citing two sources familiar with the plans.

Shares of ARN Media fell 1.5 per cent after the company severed ties with Sandilands, sparking threats of legal retaliation from the controversial broadcaster over his $100 million contract with the FM radio company.

Technology stocks also finished mixed, with the nation’s biggest tech concern, WiseTech, falling 1.4 per cent, while Xero added 2.3 per cent and data centre operator NextDC jumped 3.6 per cent. Data centre owner Goodman Group pulled the real estate sector higher with a 2.1 per cent gain.

On Wall Street, stocks edged higher overnight as investors awaited the Fed’s rate decision, due at 5am AEDT on Tuesday. Traders see virtually no chance of a cut, according to data from CME Group.

The S&P 500 rose 0.2 per cent to add to its gain from Monday, which was its biggest since the war began. The Dow Jones Industrial Average added 0.1 per cent and the Nasdaq composite rose 0.5 per cent, even as oil prices resumed their rise.

The US market’s rise despite the overnight jump in oil prices was a break from the usual playbook since the start of the war, where stock prices have tended to go in the opposite direction of oil prices. The fear in financial markets has been that a long-term disruption to the global flow of oil could send prices so high for so long that it damages the global economy. Not only would higher petrol prices sap households’ budgets, it could also push companies to pass on their own higher transportation costs to customers.

Brent crude has rallied almost 70 per cent since the start of the year, with the bulk of that surge following the initial US and Israeli attack against Iran late last month. With Tehran striking energy assets and choking off tanker traffic, the conflict has pushed up energy prices and spawned concerns about faster inflation.

Wall Street has a track record of bouncing back relatively quickly from military conflicts in the Middle East and elsewhere, as long as oil prices don’t stay too high for too long. Many professional investors are expecting that to be the case again, which has helped keep US stock prices near their record levels.

For all its dramatic swings over the last couple of weeks, including several that struck hour to hour, the S&P 500 is less than 4 per cent below its all-time high.

That’s even as Treasury yields have climbed on expectations that higher oil prices will prevent the Federal Reserve from cutting interest rates for a while. Higher yields push downward on prices for stocks and all kinds of investments. The yield on the 10-year Treasury eased to 4.20 per cent from 4.23 per cent late on Monday, but remains well above its 3.97 per cent level before the war.

Cuts to interest rates by the Fed would give the US economy and job market a boost, and President Donald Trump has angrily been calling for them. But reductions would also worsen inflation.

with AP, Bloomberg

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