Asia: Stocks rally as Iran-Israel ceasefire holds, oil claws back some losses
[HONG KONG] Most equities extended a global rally on Wednesday (Jun 25) after Iran and Israel agreed to a ceasefire that ended more than a week of hostilities, while the US dollar struggled to recover from a sharp drop stoked by bets on a US interest rate cut.
However, wariness over the agreement by the Middle East foes helped oil prices climb, though they are still well down from their highs on Monday.
Investors around the world breathed a sigh of relief after US President Donald Trump announced the ceasefire days after US forces bombed Iran's nuclear sites, which he said were 'completely destroyed'.
The Israeli government said it had agreed to the US deal after achieving all of its objectives in the war with Iran, with Prime Minister Benjamin Netanyahu hailing a 'historic victory' after 12 days of bombing.
Stocks surged and oil tanked on the news, and the optimism rolled into Wednesday, with Hong Kong, Shanghai, Sydney and Singapore leading the gains across Asia. Tokyo edged down.
Oil prices later rose, with both main contracts up more than 1 per cent.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
However, they are still down around 16 per cent from the highs hit Monday in the first reaction to the US bombing of Iran and before the ceasefire announcement.
The mood was also helped by Fed boss Jerome Powell choosing not to pour cold water on the prospects of a rate cut.
In closely watched testimony to Congress, he said that 'if it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates sooner rather than later'.
While he said: 'I don't think we need to be in any rush because the economy is still strong', the comments indicated a flexible tone.
They also came after Fed governors Christopher Waller and Michelle Bowman suggested officials could reduce borrowing costs next month.
The US dollar tumbled against its peers and remained under pressure against the yen, pound and euro in early Asian trade.
'The market staged a full-throttle risk-on revival, launching global equities into the stratosphere as oil prices cratered and rate-cut bets gained momentum,' said SPI Asset Management's Stephen Innes.
'With the Middle East truce – however duct-taped and temperamental – holding long enough to calm headlines, traders pulled the ripcord on the fear trade and dove headfirst into equities.
'Trump's... scolding of Israel and Iran added ice water to the fire, or at least enough jawbone to muzzle the Middle East combatants for now.' AFP
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
24 minutes ago
- CNA
Stocks edge up, dollar steady as ceasefire buoys confidence
TOKYO :Stocks ticked higher and crude oil held not far from multi-week lows on Wednesday, as investors took a ceasefire between Israel and Iran as a green light to head back into riskier assets and cast aside immediate worries about an energy shock. The dollar languished close to an almost four-year low versus the euro, with two-year U.S. Treasury yields sagging to 1-1/2-month troughs as lower oil prices reduced the risk to bonds from an inflation spike. The shaky truce has so far held, although Israel says it will respond forcefully to Iranian missile strikes that came after U.S. President Donald Trump announced an end to the hostilities. In addition, U.S. airstrikes did not destroy Iran's nuclear capability and only set it back by a few months, according to a preliminary U.S. intelligence assessment, contradicting Trump's earlier comments that Iran's nuclear programme had been "obliterated". Europe's Stoxx 600 index edged up 0.2 per cent in early trade, while S&P 500 futures and Nasdaq futures were flat. Japan's Nikkei rose 0.4 per cent, while Hong Kong's Hang Seng climbed 1.3 per cent and mainland Chinese blue chips gained 1.44 per cent, closing at their highest level since March 20. An MSCI index of global stocks held steady after pushing to a record high overnight. "If the still tense situation in the Middle East does indeed continue to calm down, the stock markets could have a pleasant July ahead of them, in line with their typical seasonal pattern," analysts at Frankfurt-based Metzler said. "This would result in new all-time highs in the U.S., possibly further fuelled by renewed expectations of interest rate cuts by the Fed." A series of U.S. macroeconomic data released overnight including on consumer confidence showed possibly weaker than expected economic growth in the world's largest oil consumer, bolstering expectations of Federal Reserve rate cuts this year. Brent crude rose 2 per cent to $68.43 per barrel, bouncing a bit following a plunge of as much as $14.58 over the previous two sessions. U.S. West Texas Intermediate crude was up as much to trade at $65.60 per barrel. "While concerns regarding Middle Eastern supply have diminished for now, they have not entirely disappeared, and there remains a stronger demand for immediate supply," analysts at ING wrote in a note to clients. The two-year U.S. Treasury yield was at its lowest since May 8 at 3.7848 per cent. The euro slipped 0.1 per cent to $1.1594, still close to the overnight high of $1.1641, a level not seen since October 2021, while the U.S. dollar index, which measures the currency against six major counterparts, was only slightly higher at 98.079. Gold rose marginally to about $3,328 per ounce. Aside from geopolitics, U.S. monetary policy continues to dominate investor concerns. Federal Reserve Chair Jerome Powell said on Tuesday that higher tariffs could begin raising inflation this summer, a period that will be key to the U.S. central bank considering possible rate cuts.
Business Times
33 minutes ago
- Business Times
Australia cashes in on record sheep prices as meat exports surge
[CANBERRA] Australian sheep farmers are cashing in on record-high sheep prices, as rising global demand for lamb and mutton fuels a boom in exports from the world's top sheep meat supplier. Prices are likely to rise further in the coming years as production in New Zealand, Australia's biggest sheep meat export rival, stagnates, analysts said. 'We've seen waves of higher and higher pricing as export demand and our market share has grown,' said Matt Dalgleish, a livestock and meat analyst at consultants Episode 3. While there will be seasonal price volatility, he said, 'until the underlying pressure of limited supply and strong growth in demand changes, there should be more good times ahead for Australian producers.' Australia last year exported 702,000 metric tons of lamb, mutton and goat meat worth US$3.6 billion, almost 200,000 tons more than in 2019, previously the biggest export year. Shipments in the first four months of this year were 10 per cent higher than during the same period in 2024, Australian trade data show. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Processors' need for animals pushed the price of heavy lambs to record highs of nearly US$7.14 a kilogram last week, up 50 per cent from the same time last year, according to a national price indicator compiled by industry body Meat & Livestock Australia (MLA). China is the biggest importer of sheep meat. Other major buyers include the United States, Britain, the European Union and the Middle East. Rising incomes and populations are fuelling demand for sheep meat, and high beef prices, especially in the United States, are encouraging people to switch to lamb and mutton, Dalgleish said. Helping Australia take advantage of that growth is an ongoing decline in New Zealand's sheep industry. The two countries account for more than 80 per cent of global sheep meat exports, according to MLA. The number of sheep in Australia grew in recent years, allowing farmers to better supply processors, but New Zealand's flock has shrunk every year since 2012, according to the country's statistics agency – something New Zealand farmers say is partly due to the conversion of grazing land to pine forests that earn carbon credits. 'New Zealand is the other major global exporter,' said Angus Gidley-Baird, an analyst at Rabobank. 'Its production is stagnating or retracting. So any growth in global demand is Australia's opportunity for the taking.' REUTERS
Business Times
an hour ago
- Business Times
Why global imbalances do matter
NOBODY can know either the future course of the new war in the Middle East or its possible economic effects. I wrote what I could on this in a column entitled The Economic Consequences of the Israel-Hamas War, on Oct 31, 2023. The big question, I argued, was whether the conflagration would extend to oil-related production and transport from the Gulf region. This region contains 48 per cent of global proved reserves and produced 33 per cent of the world's oil in 2022. It also has a chokepoint on exports at the Strait of Hormuz. These realities remain. The question is now mostly about Donald Trump: Does he know how to end this war? It is a question raised in other areas, too, notably the interaction of his trade policy with his fiscal policy. The aim of the former is to reduce, if not eliminate, trade deficits. The aim of the latter is to run huge fiscal deficits. These two objectives are incompatible. Large external deficits mean, by definition, that the country is spending more than its income. Since the US economy is running close to its potential, with an unemployment rate at only 4.2 per cent, no quick way to raise incomes still further exists. So reducing the external deficit will require reductions in national spending. The obvious way to do this would be with a sustained lowering of the fiscal deficit, via higher taxes and lower spending commitments. That would allow the Federal Reserve to lower interest rates, which Trump would welcome. It should also weaken the dollar, which should help increase production of tradeable goods and services. So, apart from the fact that Trump adores low taxes and high spending, why not go for this? The answer is that it could be worse than just politically difficult. The issue is illuminated by examination of sectoral savings and investment balances in the US economy since the early 1990s. Crucially, these have to add to zero, because domestic savings plus net foreign savings (that is, the net capital inflow) equals domestic investment. On average, the US household and corporate sectors had surplus savings of 3.5 per cent and 1.6 per cent of gross domestic product, respectively, from 2008 to 2023. Even from 1992 to 2007, they were close to balance. So, on a net basis, the US private sector does not need foreign savings. The dominant net borrower in the US economy is the federal government. This analysis suggests that the benefit to the US of its persistent net capital inflows is the ability to have a larger fiscal deficit, and so grow its public debt. This does not look like a good bargain. But if the government cut its deficit, while the external inflow continued, the outcome could be to drive the private sector into deficit, either via a slump in its income or a surge in its spending. The former means a recession. The latter means asset price bubbles. Broadly, the tendency for large and sustained inflows of foreign capital to produce wasteful borrowing, slumps, or both, is the biggest problem it creates. In a recent paper on the issue for the Carnegie Endowment, Michael Pettis and Erica Hogan focus on another downside: they argue that suppression of consumption in China and other countries leads to huge trade surpluses and so to large deficits abroad. Countries running these trade deficits, such as the US and UK, end up with smaller manufacturing sectors than those with surpluses. But, Paul Krugman argues, even eliminating the US trade deficit would only increase US manufacturing value added by 2.5 percentage points of GDP. Trade imbalances themselves are not so important. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Pettis and Hogan also show that the size of the manufacturing sector is associated with the level of savings. But the difference between the Chinese and US average shares of manufacturing in GDP between 2012 and 2022 is 17 percentage points (28 per cent in China to 11 per cent in the US). This is far bigger than the gap between the respective trade balances. The explanation must lie with the composition of demand. The investment that the high savings finance creates heavier demand for manufactured goods than does consumption. In sum, the main reason to worry about global trade imbalances is not the impact on manufacturing, which, for a country like the US, is a second order issue, but rather on financial stability. This is also why fiscal adjustment needs to be a co-operative venture when the participants are such big economies. Americans who focus on the fiscal deficit alone ignore its impact on global demand. The US is likely to fail to cut its external deficit just by raising tariffs, unless protection is set at totally prohibitive levels. Otherwise tariffs just shift the composition of production, from exportables towards import substitutes, with little effect on the trade balance. Yet if it tried, instead, to close its external deficit by eliminating its fiscal deficits, it could generate a significant economic slowdown. The US is not a small country: it has to take global repercussions into account. If it wants to accelerate a global discussion of imbalances with a policy intervention, the obvious one would not be tariffs but a tax on capital inflows. That would at least target excess foreign lending, though the entity that needs to wean itself off that is the US government. This might, if launched, lead to a global discussion of the kind discussed in a thoughtful paper by Richard Samans for the Brookings Institution. The discussion, he suggests, should focus on fiscal, monetary, development and international trade policies. This makes sense. But it also assumes an intelligent and co-operative approach to policy. That looks unlikely. Brandishing a stick can launch a global debate. But it is what follows the threats that matters. FINANCIAL TIMES
