The Australia 200 trades 86 points (1.01%) higher at 8686 as of 2.40pm AEDT.
Strong start for ASX 200 despite pullback
The Australia 200 (ASX 200) started strong, adding 151 points (+1.7%) in early trading to reach a high of 8750.9. However, a lack of follow-through buying, combined with a 0.40% fall in United States (US) S&P 500 futures, led it to give back 64 points of the early gains.
This strength followed a solid night on Wall Street, where improved risk sentiment was driven by a sharp decline in crude oil prices due to reports that the Group of Seven (G7) might release oil from strategic reserves. Markets were also encouraged by signs that the conflict with Iran might conclude sooner than initially feared.
Operating with a timeline similar to last year’s 12-day ‘Operation Midnight Hammer,’ President Trump noted overnight (on day 10 of the current conflict) in an interview that the US-Israeli campaign against Iran is ‘very complete’ and ‘very far ahead of schedule.’
While Trump’s shift from demands for unconditional surrender to a more measured tone provided some relief, the ‘very complete’ narrative remains difficult for markets to embrace today. The Strait of Hormuz remains largely blocked for commercial traffic, and Iran’s appointment of Mojtaba Khamenei – son of the late Ayatollah Ali Khamenei – as the new Supreme Leader signals continuity in the regime’s hardline stance.
Economic indicators and rate hike expectations
In economic news today, the Westpac consumer confidence index for March edged 1.2% higher to 91.6 from 90.0. However, there was a notable drop-off towards the end of the survey period due to concerns around the Middle East conflict, consistent with an index reading of 84. Meanwhile, the National Australia Bank (NAB) Business Confidence survey fell sharply to -1 in February from 4 the prior month, marking its first time in negative territory for 11 months, as confidence was impacted by the Reserve Bank of Australia’s (RBA) February rate hike and rising prices.
Ahead of next week’s RBA board meeting, the interest rates market is pricing in 9 basis points (bp) (a 38% chance) of a 25 bp RBA rate hike, with a full 25 bp hike fully priced for May.