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The ASX 200 continues to ride the volatile rollercoaster it’s been aboard for well over 400-days. Last week the local market looked destined for new all-time highs following triple-digit gains on Friday, close on the heels of a strong performance on the Thursday. This morning we’re sitting at our desks contemplating what’s next after President Trump declared the ceasefire with “scum” Iran is over; we knew he wasn’t happy following the USA’s debacle of an exit from the World Cup, but we didn’t think global tensions would escalate in just a matter of hours. The news is already sounding so familiar to much of the last quarter:
- US President Donald Trump declared the tentative ceasefire with Iran effectively over: “For me, I think it’s over”, followed by “As far as I’m concerned it’s just a waste of time.”
- Although, he did temper the comments later by saying he doesn’t think the conflict will start again, which caused a partial recovery in stocks.
- The comments followed fresh US strikes on Iranian targets and the removal of a waiver for Iranian oil exports, escalating tensions and reigniting volatility across energy markets.
Markets have reacted as would be expected, with equities, gold, copper and bonds all lower while crude oil soared higher for a second day – we’ve seen it all before. Ironically, the ASX put in a stellar performance on Wednesday, recovering from steep triple-digit losses to close the day down just 0.2%, with the banks again trying, but failing to offset weakness in the miners. If it wasn’t for a more than 2% fall by BHP Group (ASX: BHP) on strike fears, the index may even have closed positive despite US missiles hitting Iran – today will be another test.
Despite the news around Iran, two news stories this week reminded us why the ASX has been underperforming in the last 1-2 years:
- Firstly, Australia’s Productivity Commission has described productivity growth as at its “lowest ebb in 60 years”, and now our largest listed company is facing strikes at Port Hedland – not a great advert for overseas investors.
- Secondly, most of the world is striving to ride the AI boom, which is generating billions for some companies, but at home we’re more focused on regulating it – we feel some balance of the two would make more sense.
Overseas markets fell overnight on the news of the renewed hostilities around Iran, although US tech found some buying led by NVIDIA, which advanced over +3%. In Europe, the German DAX tumbled 2.2%, with the UK FTSE not too far behind, retreating by 1.7%. In the US, the S&P 500 erased ~80% of its early losses to finish down just -0.3%, with the NASDAQ managing to reverse early weakness totally to end the day up +0.3%.
- The SPI futures are calling the ASX200 to open down 0.5% this morning, although things looked far worse in the early hours of the morning with the SPI recovering ~100pts from the overnight lows.
MM remains bullish towards the ASX200 around 8750
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