Markets Overview
- ASX SPI 200 futures down 0.3% to 8,592.00
- S&P 500 down 1.5% to 6,672.77
- Dow Average down 1.6% to 46,679.83
- Aussie down 1.0% to 0.7078 per US$
- US 10-year yield rose 2.6bps to 4.2570%
- Australia 3-year bond yield rose 8.3 bps to 4.55%
- Australia 10-year bond yield rose 10 bps to 4.95%
- Gold spot down 1.7% to $5,086.90
- Brent futures up 10.2% to $101.35/bbl
Economic Events
Hedge funds are ramping up bullish bets on the Australian dollar in the options markets before next week’s central bank decision. The volume of call options that wager on gains in the Aussie versus its US peer climbed to six times that of puts on Wednesday.
Asian stocks and bonds were primed to follow Wall Street lower as a renewed oil spike stoked fears the war in Iran will further crimp energy supplies and fuel inflation.
Equity index futures for Japan, Hong Kong and Australia all fell. The S&P 500 slipped 1.5% to the lowest since November. Even investors that had rotated into the apparent safety of large US tech companies felt the sting as the Nasdaq 100 declined 1.7% and a gauge of megacaps approached the threshold of a correction. Gold slumped, falling 1.9% in the session before edging slightly higher early Friday.
The moves reflected another surge in oil prices. Brent closed above $100 for the first time since 2022. Crude tanker traffic through the Strait of Hormuz has largely stopped, according to one tracker, underscoring the supply bottleneck.
Australian bonds opened lower Friday after Treasuries fell across the curve on growing inflation fears. Traders have now scrapped expectations for any Federal Reserve rate cuts in 2026. The policy-sensitive US two-year yield climbed nine basis points to 3.74% Thursday and the 10-year rose three basis points to 4.26%. The dollar hit an almost two-month high.
“The number one issue facing the markets right now is obviously the war,” said Matt Maley at Miller Tabak. “The conflict in the Middle East is not abating. This caused crude oil to spike. We also have the issue of the growing stress on the credit markets.”
Sentiment was also weakened by further signs of distress in the $1.8 trillion private-credit market, and a handful of underwhelming corporate results. Banks sank as redemption requests from private-credit funds forced Morgan Stanley and Cliffwater LLC to cap withdrawals. Deutsche Bank AG flagged a $30 billion exposure to the sector. In late hours, Adobe Inc. gave a tepid outlook and said its chief will resign.
In Asia, data set for release includes unemployment in the Philippines, money supply for South Korea and consumer confidence in Thailand. Japan is set to sell ¥4.7 trillion of 3-month bills. The yen traded around 159 per dollar early Friday after weakening through the week.
Traders will also be on the lookout for US inflation data due later, although the backward-looking measure may do little to alter investors’ thinking given the geopolitical uncertainty.
Other News
President Donald Trump and Iran’s new supreme leader both struck defiant tones, offering little relief to energy markets despite fresh US efforts to curb oil prices.
The US president said in a social-media post that preventing Iran from having nuclear weapons and threatening the Middle East is “of far greater interest and importance to me” than the cost of oil. Mojtaba Khamenei noted the Islamic Republic would seek to ensure the Strait of Hormuz remains effectively closed.
The Trump administration plans to waive a century-old maritime law that requires American ships be used to transport goods between US ports as it seeks to blunt surging oil prices, Bloomberg News reported. The US Navy could start escorting tankers through the Strait of Hormuz by the end of March, Energy Secretary Chris Wright told CNBC.
Goldman Sachs Group Inc. warned that oil prices could exceed the 2008 peak if flows via Hormuz remain depressed through March. Brent rallied to a high of $147.50 that year. The Iran war is causing unprecedented turmoil in oil markets, hitting 7.5% of global supply and an even bigger swath of exports, the International Energy Agency said.
With the Fed widely expected to hold rates steady next week, investors will be closely watching for any shifts in its outlook, as Trump renews calls for the central bank to cut interest rates.
“The most hawkish outcome would be if the Fed removed its easing bias from the statement, while the median projection shifted from one cut this year to no change,” said Stephen Brown at Capital Economics.
