The Australian share market has closed lower, but pulled back from steeper earlier losses, after Iran’s foreign minister said its strikes against US forces in Iraq “concluded proportionate measures in self-defence” following the US killing of an Iranian general.
- US officials have confirmed rockets have been fired at the Al-Asad and Erbil airbases in Iraq, which host US forces
- The Australian share market and US stock market futures fell sharply on the initial news
- Markets recovered some of those losses in the afternoon as the Iranian foreign minister said “self-defence measures” had “concluded”
In an escalation feared by markets, US officials this morning confirmed rockets had been fired at the Al-Asad and Erbil airbases in Iraq, which host US forces.
US stock market futures initially fell sharply in response to the news, with S&P 500 and Dow Jones futures both falling as much as 1 per cent.
The Australian share market has also took a hit, with the ASX 200 also down close to a per cent at its worst.
Tokyo’s Nikkei initially fell more than 2 per cent, while New Zealand’s main index also lost more than 1 per cent.
However, US futures recovered in afternoon trade, after Iran’s foreign minister Mohammad Javad Zarif said on Twitter that the regime had “concluded proportionate measures in self-defence” and did “not seek escalation or war”, while adding “but will defend ourselves against any aggression”.
@JZarif (Iran's Foreign Minister): "Iran took & concluded proportionate measures in self-defense under Article 51 of UN Charter targeting base from which cowardly armed attack against our citizens & senior officials were launched. We do not seek escalation or war, but will defend ourselves against any aggression."
Australia’s share market followed the recovery in US futures, closing just 0.1 per cent lower for the day at 6,818 for the ASX 200 index.
Gold was the major beneficiary of the tensions, having jumped around $US35 an ounce this morning to around $US1,610/ounce as investors sought safe havens amid fears of an escalating conflict between the US and Iran.
That briefly took it to a fresh Australian dollar record price of $2,351.86/ounce.
However, the precious metal eased back to $US1,592/ounce after the Iranian foreign minister’s tweet was seen as lowering tensions.
Oil prices have remained elevated, however, with Brent crude still more than 1 per cent higher at $US69.08 a barrel, although it had risen further in earlier trade.
Aussie dollar back below 69 US cents
The Australian dollar has fallen back below 69 US cents and is weaker against a basket of currencies, as the US dollar rises after America’s trade deficit fell to a three-year low.
By 5:13pm (AEDT) the local currency was worth 68.7 US cents.
The currency had traded above 70 US cents at the very start of the new year, but has tracked lower over the past week.
Stronger economic data out of the United States contributed to the Aussie dollar’s decline against the greenback overnight.
Market snapshot at 8:15am (AEDT):
- ASX SPI futures +0.04pc at 6,767, ASX 200 (Tuesday’s close) +1.3pc at 6,826
- AUD: 68.65 US cents, 52.35 British pence, 61.61 Euro cents, 75.53 Japanese yen, $NZ1.03
- US: Dow Jones -0.4pc at 28,581, S&P 500 -0.3pc at 3,237, Nasdaq -0.03pc at 9,068
- Europe: FTSE 100 -0.02pc at 7,573, DAX +0.8pc at 13,226, CAC -0.02pc at 6,012, Euro Stoxx 50 flat at 3,419
- Commodities: Brent crude -1pc at $US68.21/barrel, spot gold +0.4pc at $US1,571.75/ounce
Amid the US-China trade dispute, US imports fell and exports rose in November, while the closely-watched goods deficit with China tumbled by more than 15 per cent.
The US services sector strengthened, with data showing an improvement in non-manufacturing business activity.
However, it was not only a stronger US dollar that hurt the Australian dollar. Domestically, analysts have begun to weigh up the economic impact of a devastating, and ongoing, bushfire season.
On Tuesday, the ANZ-Roy Morgan weekly survey of consumer confidence fell to its lowest level in more than four years.
“A drop in confidence at the start of the year is unusual and almost certainly reflects the impact of the catastrophic bushfires over the weekend,” said ANZ’s head of Australian economist David Plank.
ANZ’s monthly indicator of job advertisements fell 6.7 per cent in December, with economists also blaming the impact of the bushfires.
“Based on previous major natural disasters, such as Victoria’s Black Saturday fires and Queensland’s 2010-11 floods, the current bushfires could see a short-term negative impact on employment,” said ANZ senior economist Catherine Birch.