ASX edges higher as market rollercoaster continues; Miners gain, banks fall

The Australian sharemarket closed slightly higher on Tuesday, having trimmed its early gains as fragile optimism following comments by Donald Trump that the US and Iran were talking about an end to their war soon gave way to renewed caution and fears of further escalation in the Middle East.

The S&P/ASX 200 finished up 13.5 points, or 0.2 per cent, at 8379.40, as gains in miners helped offset weaker oil and financial stocks. The market’s advance came after the ASX lost 0.7 per cent on Monday. The Australian dollar was trading at US70.12¢ by mid-afternoon AEDT.

Further weighing on sentiment, a report showed the petrol price shock, the war in Iran and the Reserve Bank’s latest interest rate rise have crashed consumer confidence. The ANZ-Roy Morgan weekly measure of consumer sentiment dropped 5.4 points over the past seven days to its lowest level since the measure was created in 1973 during the first oil shock.

The local bourse was up as much as 1.7 per cent in the morning after oil prices eased and Wall Street rose overnight following Trump’s announcement, which Iran dismissed as “fake news”. However, oil prices were back up again in the afternoon after The Wall Street Journal reported that US allies in the Persian Gulf are inching toward joining the war.

“The market woke up to some potentially good news,” said Chris Larkin at E*Trade from Morgan Stanley. “But follow-through on any relief rally will likely require tangible follow-through on the geopolitical front. We’re still living in a headline-driven market.”

Gains by the mining giants were bolstering the local bourse, with BHP up 3 per cent, Fortescue rising 3.4 per cent and Rio Tinto gaining 2.2 per cent. Prices for copper jumped the most in almost two months in London after Trump’s statement. The metal – viewed as a bellwether for the global economy – had slumped to a three-month low due to concerns about the war’s economic fallout.

Gold stocks also ended up higher, with Northern Star Resources rising 2.1 per cent, Evolution Mining up 3.4 per cent and Newmont trading 3.9 per cent stronger. That’s even as gold resumed its volatility amid the conflicting statements on the war, with Trump’s comments bringing only a brief respite from the precious metal’s dramatic wartime decline. The conflict has raised the risk of inflation and higher interest rates, and when government bond yields rise, the appeal of gold as a haven asset diminishes because it doesn’t pay any interest.

Kathmandu owner KMD Brands jumped 3.2 per cent after the company knocked back a deal by US surfwear company Stockhouse, which would have seen KMD spin off its Rip Curl brand as a separate ASX-listed company, and then merge it with Stockhouse. The offer “creates no value for shareholders,” KMD chairman David Kirk said.

However, financial stocks, which make up more than a third of the ASX, weighed on the market, with three of the big four banks trading lower. CBA fell 1.8 per cent and Westpac dropped 1.6 per cent. National Australia Bank slumped 4.5 per cent after Morgan Stanley and JPMorgan downgraded the stock following its recent gains. ANZ Bank edged up 0.5 per cent.

Energy stocks ended up mixed after the oil price resumed its rally. Oil and gas giant Woodside slipped 0.2 per cent. Santos dropped 2.6 per cent after it said it has to suspend shipments from its Darwin Australian gas-export terminal just as the war is igniting the sharpest LNG price rises in years. Refiner Ampol rose 1.2 per cent. Fossil fuel producers Yancoal and Whitehaven Coal, which have seen their shares surge on the back of the conflict, gave up 3.8 per cent and 0.9 per cent.

The price for a barrel of Brent crude fell 10.9 per cent to settle at $US99.94 overnight, down from nearly $US120 at one point last week, after Trump said the warring countries held productive talks the last two days “regarding a complete and total resolution of our hostilities in the Middle East.” The oil price slump boosted Wall Street, with the S&P 500 climbing 1.1 per cent overnight for its best session since the war began on February 28.

However, as sentiment soured on Tuesday, Brent jumped back 4 per cent to about $US104 a barrel. The conflict shows few signs of easing and the Strait of Hormuz – crucial for the flow of oil from the Middle East – remains effectively shut, with only a trickle of vessels making their way through.

Iran has denied talks with the US took place, and Iranian parliament speaker Mohammad Bagher Ghalibaf said that “fakenews is used to manipulate the financial and oil markets” in a posting on X.

Over the weekend, Trump had threatened to “obliterate” Iran’s power plants if it doesn’t open up the strait within 48 hours. The narrow waterway off Iran’s coast has become a sore point for Trump and the economy because its near-closure has prevented oil tankers from leaving the Persian Gulf to supply customers around the world.

Trump said on Monday that he is postponing attacks on Iranian power plants for five days to allow talks to continue. Quickly afterward, though, came the denials from Iran about talks, while Iran’s semi-official Fars and Tasnim news agencies portrayed the American president as backing down.

Turkey and Egypt, meanwhile, said they had spoken to the warring parties, the first sign of co-ordinated mediation, which could be an encouraging signal.

Financial markets have had vicious swings, both up and down, since the war began because of uncertainty about how long it may last. The fear is that a long-term disruption could keep so much oil and natural gas off global markets that it creates a punishing wave of inflation for the global economy.

The swings of the past few weeks are similar to, but not as dramatic as, those that hit last year when Trump shocked the global economy on “Liberation Day.” Many of his worldwide tariffs ended up being milder than he initially threatened, and the back-and-forth in negotiations led to historic moves up and down.

In Europe, stock indexes immediately flipped from losses to gains following Trump’s announcement. France’s CAC 40 rose 0.8 per cent, and Germany’s DAX returned 1.2 per cent.

with AP and Bloomberg

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