ASX jumps on peace deal; Gold miners and travel stocks rally, oil stocks fall

The Australian sharemarket rallied on Monday after Donald Trump announced a peace deal that includes an immediate ceasefire “on all fronts” of the war in the Middle East.

The S&P/ASX 200 finished up 110 points, or 1.25 per cent, at 8914 as oil prices declined following Trump’s announcement, which came after a series of clashes almost derailed the agreement. Brent Crude, the international standard, was down 4.4 per cent at $US83.49 a barrel by late afternoon.

Six of the ASX’s 11 industry sectors advanced, led by the mining and financial heavyweights. Travel stocks soared, while energy stocks were sold off on expectation the oil crunch will ease as the crucial Strait of Hormuz is set to reopen on Friday. The Australian dollar rose 0.4 per cent to US70.75¢.

The peace agreement paves the way to end a conflict that has claimed thousands of lives, disrupted the global economy and driven volatility across financial markets since the end of February.

“Markets have been waiting for this news for months, and the relief is already showing,” said Josh Gilbert, lead analyst for Asia Pacific and the Middle East at eToro, a multi-asset investment platform operator. “However, this is still a move of optimism, not certainty. The nerves won’t fully settle until the deal is signed, meaning investors should still err on the side of caution.”

Trump confirmed the peace deal with a statement on social media shortly after a key negotiator in the talks, Pakistani Prime Minister Shehbaz Sharif, formally announced the agreement.

“The Deal with the Islamic Republic of Iran is now complete. Congratulations to all!” he said on social media on Sunday evening in Washington (about 7.30am on Monday, AEST).

“I hereby fully authorise the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!”

The critical waterway would reopen on Friday after the clearing of mines, Trump later added. The signing ceremony for the deal will be held on Friday in Switzerland, Sharif said.

“There are just so many timelines involved, and I don’t know whether there is a clear sequence for all these terms to be implemented,” said Muyu Xu, a senior crude oil analyst at commodity intelligence firm Kpler. “A lot can happen during these windows, and Iran could close the strait again if it believes the US or Israel have taken any deal-breaking steps.”

Mining stocks led the relief rally on the ASX, with the iron ore and copper mining heavyweights BHP (up 3.6 per cent), Rio Tinto (up 2.7 per cent) and Fortescue Metals (up 3 per cent) all advancing.

Gold producers rallied as prices for the precious metal jumped up in anticipation the oil price shock will ease, softening inflation and the pressure on central banks to raise interest rates. Higher rates make bullion less attractive to investors lured by rising bond yields. Northern Star Resources climbed 7.9 per cent, Evolution Mining soared 10 per cent and Newmont jumped 6.8 per cent.

Real estate investment trusts also benefited from bets that slowing inflation will allow an easing in interest rates, boosting their appeal against government bonds. Goodman Group rose 1.7 per cent, Charter Hall gained 3.2 per cent and Stockland rose 3.3 per cent.

The big four banks were all higher, helping lift the local market, with financial stocks making up more than a third of the ASX. CBA, the nation’s biggest lender, gained 1.4 per cent. Westpac added 0.9 per cent, National Australia Bank rose 2.6 per cent and ANZ Bank rose 1 per cent.

Even exchange operator ASX Ltd added 2.6 per cent, despite news that it has to pay a $20.5 million penalty after admitting it misled the market about its troubled CHESS replacement project.

The corporate regulator and ASX have agreed to ask the Federal Court to impose the penalty, plus $3 million in costs, over a February 2022 market announcement that said the project was “progressing well”. Clearing House Electronic Subregister System, or CHESS, is the system used to settle share trades.

Travel stocks soared, buoyed by prospects of moderating jet fuel prices and hopes of an end to booking uncertainty and disruptions for international travellers as the war ends. Qantas Airways lifted 6.3 per cent, Virgin Australia shares rallied 12.9 per cent and Flight Centre gained 7.3 per cent.

Tech stocks also advanced, helped by the market’s renewed risk-on sentiment and SpaceX’s record-breaking initial public offering over the weekend. WiseTech Global was up 2.4 per cent and AI data centre operator Next DC added 1.7 per cent.

Sigma Healthcare surged 6.1 per cent after the owner of the Chemist Warehouse chain announced its withdrawal from the Boots sale process, after being among the parties exploring a potential acquisition of the British pharmacy chain in a deal worth as much as $14 billion. Sigma “has elected to withdraw its interest and cease discussions immediately,” it said in a statement.

Shares of Accent Group, the embattled footwear and clothing retailer behind Hype DC, Platypus, Lacoste and other brands, rallied 15.4 per cent after the company received a hostile takeover bid from its biggest investor, UK retail giant Frasers Group.

Meanwhile, defensive sectors such as consumer staples and utilities struggled as investors became more bullish. Supermarket chain Coles dropped 2.1 per cent, Woolworths slipped 0.3 per cent and Origin Energy fell 3.3 per cent. The nation’s biggest healthcare stock, CSL, dropped 1.8 per cent and Telstra lost 1.9 per cent.

Fossil fuel stocks were the immediate losers of the peace deal as oil prices eased. Brent Crude, the international standard, fell 4.4 per cent to below $US84 a barrel, after closing last week at the lowest in more than three months, while West Texas Intermediate dropped below $US81.

Oil and gas company Woodside slumped 5.7 per cent, as it also sought to douse speculation about a potential takeover by global oil giant Exxon Mobil. “Woodside is not aware of any proposal and confirms it is not in discussions regarding a potential transaction with Exxon Mobil,” the company said in a statement to investors.

Woodside’s American depositary receipts rose as much as 14 per cent in New York on Friday after media reports that Exxon was studying potential acquisition targets including the Australian oil producer as it seeks to deepen its presence in liquefied natural gas and Asian market.

Woodside’s rival Santos dived 8.4 per cent, while local refiners Ampol and Viva Energy lost 7.3 per cent and 5.8 per cent, respectively. Coal miners also declined, with Yancoal down 7.3 per cent and Whitehaven Coal down 4.8 per cent.

On Wall Street on Friday, the S&P 500 added 0.5 per cent to close out its 10th winning week in the last 11. The Dow Jones Industrial Average climbed 353 points, or 0.7 per cent, and the Nasdaq composite gained 0.3 per cent.

The biggest factor for Wall Street over the last week was artificial-intelligence stocks, and how they have gone from roaring to records to suddenly turning lower. The concern is whether such stocks shot too high, too fast because of AI mania, and their careening moves have sometimes reversed direction by the hour.

SpaceX suggested plenty of demand still exists among investors for AI after its stock leaped 19.2 per cent in its first day of trading. That gave Elon Musk’s rocket company a total value of $US2.1 trillion ($3 trillion), making it bigger than Exxon Mobil, Bank of America and Coca-Cola combined. In addition to building rockets, SpaceX also owns the artificial intelligence company xAI.

AI-related stocks were otherwise mixed following their rollercoaster moves over the last week. Micron Technology’s drop of 1.4 per cent was one of the heaviest weights on the S&P 500, but CoreWeave jumped 5 per cent after learning it will join the Nasdaq 100 index later this month.

Elsewhere on Wall Street, Adobe dropped 6.8 per cent despite reporting stronger profit and revenue for the latest quarter than analysts expected. Its stock has lost nearly 42 per cent this year, and it announced its finance chief is leaving the company on Monday.

In the bond market, Treasury yields rose on Friday to regain some of their sharp slide from the day before, when oil prices dropped following Trump’s announcement. The yield on the 10-year Treasury climbed to 4.48 per cent from 4.45 per cent late on Thursday.

High yields can slow entire economies and undercut prices for all kinds of investments, including stocks and cryptocurrencies. They hit investments seen as the most expensive in particular, and some critics are calling the AI industry a bubble where investment inflated too far.

With AP, Bloomberg

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