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Chapter 1: What is the main topic discussed in this episode?
A listener production.
The Dow hits a record high while other US indices falter as oil tumbles again. And what's in store for the Aussie market after the RBA's rates decision yesterday? Hello, good morning. I'm James Gruber. It's Wednesday, the 17th of June, and this is the morning edition of the ComSec Market Update.
Chapter 2: What factors contributed to the Dow reaching a record high?
Well, optimism around an Iran peace deal continues to ricochet through markets. Oil tanked another 5% overnight. Meanwhile, US stocks were mixed, with the Dow touching another record high while the other major indices fell. Investors funneled money into economically sensitive sectors like financials that will benefit from an end to the war. And then there's SpaceX, which soared another 5%.
It was up as much as 18% during the day and overtook Amazon and Microsoft in market value. The oddity is that SpaceX isn't part of any index just yet, though that's likely to change very soon. Let's take a deeper look at what's happened with Aussie futures, commodities and currencies. The ASX is poised to open slightly lower, with index futures down 0.2%.
As for the ASX 200 yesterday, it closed flat at $8,918. The index erased early losses after the RBA kept its cash rate steady at 4.35%. In its statement, the RBA said inflation was still too high and it would do whatever necessary to bring it down, including increasing the cash rate target further if required.
Today, the ASX is expected to see further falls in energy shares after oil prices dropped again, and tech shares may come under pressure after the fall on the NASDAQ. To commodity markets, global oil prices fell to a three-month low on Tuesday as traders hoped the US and Iran would agree to end the war and allow oil to flow through the Strait of Hormuz.
Brent crude futures settled more than 5% lower at US$78.96 a barrel. Base metal prices were steady on Tuesday. Copper futures rose 0.1%, while aluminium futures declined 0.1%. hitting 2.5-month lows as supply concerns eased. Gold futures were largely flat, rising 0.1% to US$4,354 an ounce. Meantime, iron ore futures were little changed, down 0.3% to US$101.66 a tonne.
So let's take a look at currencies. They were mixed against the US dollar. The euro was 0.2% higher at 1.1607 US dollars. The Japanese yen dropped 0.1% to 160.46 yen. And the Aussie dollar slipped 0.1% to 70.65 US cents. Now let's head to Wall Street. The Dow Jones Index finished up 0.6%, the S&P 500 dropped 0.6%, and the NASDAQ lost 1.2%.
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Chapter 3: How did oil prices impact the US stock market?
A closer look at the trading day there. The NASDAQ composite and the S&P 500 lost ground on Tuesday under pressure from technology stocks, while the Dow Jones Industrial Average touched a record high. After rallying sharply on Monday on optimism about a US-Iran peace deal, investors in the S&P 500 and Nasdaq took a breather, even as oil prices fell to their lowest level since early March.
Investors rotated into economically sensitive sectors and sold richly valued tech stocks. Of the S&P 500's 11 major sectors, technology was the biggest lagger, down 2.3%, while financials were the biggest gainer, up 1.5%, followed by utilities' 0.7% advance. Shares of JPMorgan Chase climbed 3.7%, while Wells Fargo added 2.3%, and Bank of America added 1.7%. Among other movers, Yum!
Brands rose 2% after the fast food chain said it would sell its Pizza Hut chain for $2.7 billion as it struggles with stiff competition and cautious consumer spending. Meantime, U.S. government bond yields were lower on Tuesday following conflicting economic data. U.S. import prices rose 1.9% in May, above forecasts. There are also some signs of weakness in the U.S.
economy, with housing starts plummeting 15.4% in May, the largest decline since March 2024. The U.S. 10-year Treasury yield fell 3 points to 4.44%, while the U.S. 2-year Treasury yield slipped 1 point to 4.06%. To the European markets, the continent-wide FTSE Euro First 300 index ended up 0.3%, and the UK FTSE 100 advanced 0.6%.
Europe edged higher, extending the previous session's rally, sparked by a preliminary agreement between the US and Iran that could end their war. Sectors that are expected to fare better during times of economic certainty did well. Industrial goods and services advanced 1.1%, while banks led broader gains with a 1.7% jump.
Among corporate updates, UniCredit gained 4.2% after it rejected the Italian lenders offered to buy Commerce Bank shares. Concerns also resurfaced that tech companies were increasingly relying on debt funding, which had sparked sell-offs globally several times since last year. ST Microelectronics fell 4.1% after announcing plans to issue convertible bonds worth $1.5 billion.
It's now time for the watch list. In Australia, the Melbourne Institute Leading Index is out and RBA Assistant Governor Brad Jones speaks at a bank conference in Melbourne. In the US, the Federal Reserve will make a decision on interest rates with the market expecting them to remain on hold. And now it's time for our One More Thing segment.
Compound interest has been called the eighth wonder of the world. But did you know that the first record of compound interest is also the first record of a war? Yale professor William Goetzmann says records of a war between two Sumerian city-states in the 2600s BC show that the victors billed the losers for back rent on land that occupied and
and they calculated the bill using compound interest over 80 years. The result? A debt of billions of bushels of grain. And that's it for today. The ComSec Media and Markets team is monitoring developments on today's local trading session, so check out our afternoon episode of the podcast for all the key updates. I'm James Gruber. Have a great day.
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