ASX set to rise, Wall Street mixed; Oil prices swing

Oil prices swung after a scare where prices popped and then moderated, and the yo-yo moves kept stock markets worldwide unsettled.

The S&P 500 was down 0.3 per cent after flipping between modest gains and losses. The Dow Jones rose 48 points, or 0.1 per cent. The Nasdaq composite was down 0.7 per cent, though it remains near its all-time high set last week like the S&P 500. The Australian sharemarket is set to rise, with futures at 4.58am AEST pointing to a gain of 41 points, or 0.5 per cent, at the open. The ASX slumped by 1.5 per cent on Monday. The Australian dollar was trading at US71.65¢.

The centre of the action recently has been the world’s bond markets, where climbing yields have cranked up the pressure on economies and stock markets worldwide. Higher yields make it more expensive for households and businesses to borrow, which US homebuyers are all too familiar with because of higher mortgage rates.

Higher interest rates could also make it more difficult for companies to borrow to build huge data centres for artificial-intelligence technology, which has been driving much of the US economy’s growth.

Yields have been climbing for several reasons, and at the top of them have been oil prices. The war with Iran has trapped many oil tankers in the Persian Gulf instead of delivering crude to customers worldwide, which in turn has driven up crude’s price.

The price for a barrel of Brent crude oil, the international standard, got as high as $US112 overnight after President Donald Trump told Iran on his social-media platform Sunday that “the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them.”

Prices eased from there on hopes the two sides can reach a deal that would get oil flowing worldwide again. The price for a barrel of Brent crude was at $US110.80, up 1.4 per cent from Friday. That’s well above its roughly $US70 price from before the war.

That drop in oil prices helped boost stock markets that hadn’t finished trading yet, and France’s CAC 40 index went from a loss of 1.2 per cent to a gain of 0.4 per cent. By that point, Japan’s Nikkei 225 had already finished 1 per cent lower, with Hong Kong’s Hang Seng down 1.1 per cent.

On Wall Street, Dominion Energy pushed upward on the US stock market after NextEra Energy agreed to buy it in an all-stock deal to create the world’s largest regulated electric utility by market value. Dominion rallied 8.3 per cent, and NextEra fell 6.7 per cent.

Boston Scientific climbed 5.3 per cent after saying it would spend $US2 billion on its previously announced stock buyback program of $US5 billion by the end of June. Such purchases send cash directly to investors and boost the company’s per-share earnings.

Delta Air Lines rose 0.5 per cent, aided by lower oil prices and news that Berkshire Hathaway bought more than $US2.6 billion of the airline’s stock. Berkshire Hathaway built a reputation as a value investor able to buy stocks at low prices under its former leader, Warren Buffett.

Pulling downward on Wall Street was Regeneron Pharmaceuticals. It dropped 9.7 per cent after reporting discouraging data from a trial of a treatment for melanoma.

This upcoming week will offer little in terms of data on the US economy, but a heavily anticipated report on Nvidia’s latest quarterly results will arrive Wednesday. The chip company has routinely blown past analysts’ expectations each quarter, while forecasting even bigger growth than Wall Street had thought. It will likely need to keep up such momentum to keep AI stocks driving the market to more records.

Target, Home Depot and Walmart will also report their latest quarterly results this week.

In the bond market, the yield on the 10-year Treasury rose to 4.60 per cent from 4.59 per cent late Friday. It climbed as high as 4.63 per cent overnight when oil prices were at their heights.

The yield on the 10-year Japanese government bond rallied toward its highest level since the late 1990s.

Yields worldwide have been climbing on fears about higher inflation caused by higher oil prices, which in turn could push central banks not only to abandon the thought of cutting interest rates but also consider hiking rates. Higher rates would slow inflation but at the cost of hurting the economy and dragging on prices for stocks and other investments.

Several solid reports on the US economy recently, along with worries about the US government’s huge and growing debt problem, are also pushing upward on yields.

AP

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