ASX slips as investors track war in Middle East; Banks rise, miners fall

Welcome to your five-minute recap of the trading day.

The numbers

Caution reigned on the Australian sharemarket on Thursday as investors saw America weighing the potential for direct conflict with Iran, and the Federal Reserve warned of meaningful inflation ahead for the world’s largest economy.

The S&P/ASX 200 edged down 7.5 points, or less than 0.1 per cent, at 8523.70, with seven of the 11 industry sectors declining. It’s the market’s third decline in a row, though the daily drops have been limited to 0.1 per cent or less.

The Australian dollar was trading 0.6 per cent lower at US64.69¢ shortly after 5pm AEST.

Wall Street edged lower after the Fed’s announcement. Credit: AP

The lifters

A rise in financial and consumer stocks bolstered the ASX. All big four banks were up, with CBA – the biggest stock on the ASX – hitting a fresh intraday high of $183.31 before finishing up 1.5 per cent at $182.85. National Australia Bank rose 1.1 per cent and Westpac jumped 1.7 per cent.

ANZ Bank edged up 0.3 per cent, having been down earlier after announcing its senior executive Maile Carnegie would retire on July 1. Suncorp Bank CEO Bruce Rush has been appointed as acting retail executive until a permanent replacement is found. Suncorp’s shares rose 0.8 per cent.

Consumer discretionary stocks also did well. Bunnings and Officeworks owner Wesfarmers rose 0.9 per cent and pokies maker Aristocrat added 1.4 per cent.

The laggards

Materials stocks weighed on the local bourse, with iron ore heavyweights BHP (down 2 per cent), Fortescue (down 1.7 per cent) and Rio Tinto (down 2.3 per cent) falling for a second day as prices for the steel-making ingredient weakened further overnight.

Iron ore prices have shaved off more than 13 per cent of their value this year as China’s weak property market shows no signs of recovery. This is part of a long-term decline that Citigroup predicts could bring prices as low as $US85 a tonne in six to 12 months. Iron ore was trading at $US92.60 in the morning.

Gold miners also declined, with Northern Star Resources dropping 1 per cent and Evolution Mining slumping 4.5 per cent as prices for bullion slipped.

CSL shares fell 1.4 per cent, leading healthcare stocks lower, as Robert F. Kennedy Jr’s plan for America’s vaccines started coming into focus. A draft agenda for next week’s Advisory Committee on Immunisation Practices meeting revisits old topics concerning vaccine safety, raising questions that many public health experts consider long settled. The committee’s decisions could have sweeping implications for how vaccines are made, paid for, and distributed around the US. CSL’s Seqirus unit is one of the world’s biggest maker of influenza vaccines.

Energy stocks were tracking lower as oil and gas giants Woodside and Santos slipped 0.1 per cent and 0.6 per cent, respectively. Oil dipped after a volatile trading week as the market focused on whether Donald Trump will plunge the US into the war in the Middle East.

Troubled tech giant WiseTech Global, the largest IT company on the ASX, dropped 1.8 per cent, sending tech stocks lower after announcing changes to its board on Thursday morning, with two long-term directors, Charles Gibbon and Michael Gregg, leaving the company.

KMD, which owns outdoor sports apparel brands Rip Curl and Kathmandu, fell 3.8 per cent after warning that “unseasonably warm weather” during the Australian autumn had hurt its sales.

The lowdown

IG market analyst Tony Sycamore said the ASX traded “within a holding pattern for the fourth session this week as traders await to see whether the next stage of the Israel-Iran conflict will bring US military intervention or peace talks”.

“Even a surprise fall in employment in today’s labour force report failed to provide a spark,” he noted.

Australia’s economy surprisingly shed 2500 jobs in May, though unemployment held steady as fewer people sought work, bolstering the case for the Reserve Bank to reduce interest rates further. Economists had expected a 21,200 rise. The jobless rate held at 4.1 per cent, data from the Australian Bureau of Statistics showed.

Fed chair Jerome Powell said conditions remain uncertain. Credit: Bloomberg

Investors turned more risk-averse after Bloomberg reported that senior US officials are preparing for a possible strike on Iran in the coming days. Markets were already on edge after America’s Fed downgraded its estimates for growth this year and projected higher inflation, underscoring how tariff-driven uncertainties are complicating the US central bank’s bid to ease policy.

The media reports “underscore the seriousness of the strike planning, but markets remain hesitant to fully price in escalation,” said Charu Chanana, chief investment strategist at Saxo Markets, adding that markets will “stay on edge until there’s more clarity”.

On Wall Street, the S&P 500 finished nearly unchanged. The Dow Jones dipped 0.1 per cent, and the Nasdaq composite rose 0.1 per cent. Wall Street is closed tonight for America’s Juneteenth holiday.

Treasury yields held relatively steady after the Fed released a set of projections showing the median official forecast expects to cut the federal funds rate twice by the end of 2025. That’s the same number projected three months ago, and it helped calm worries a bit that inflation caused by Trump’s tariffs could tie the Fed’s hands.

So far, inflation has remained relatively tame, near the Fed’s target of 2 per cent. But economists have been warning it may take months to feel the effects of tariffs.

Fed Chair Jerome Powell stressed that all the uncertainty surrounding tariffs means the median forecast for two rate cuts this year could end up being far from reality. “Right now it’s just a forecast in a very foggy time,” he said.

Trump said it’s not “too late” for Iran to give up its nuclear program, though he also declined to say whether the US military would strike the country.

“I may do it. I may not do it,” he said. “I mean, nobody knows what I’m going to do.”

with AP, Bloomberg

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