Daily: Middle East conflict to benefit Gold, oil, defence
• US markets: Trump says Israel and Iran could reach a deal to end thier conflict but may need to 'fight it out'. US futures suggest S&P500 could rise 0.2% on Monday.
• Aussie markets: ASX200 defies the odds and rises 0.24% with 110 of the ASX200 stocks moving higher. Santos jumps 15% after takeover offer for $8.89 per share.
• Stocks to watch: Santos, Woodside, move up on ASX, even Qantas. In US watch Diamondback, Tesla, Palantir that were some of the best performers on Friday.
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The three new certainties in markets now
With Iran striking back on Israel after its attacks, and the US mulling involvement, investors will be bracing for further impacts on markets, a broad risk-off mood, and should expect higher levels for oil, defence, and gold. After just three days of conflict, we’ve already seen oil prices spike 7% to US$76.94 — their highest level since January — now up 19% in five days. Gold is back at record all-time highs, and defence stocks such as Raytheon $RTX Corp (RTX.US)$, the world’s biggest missile company, have also hit new records, pulling up defence ETFs too such as $Ishares Trust U.S. Aerospace & Defense Etf (ITA.US)$.
Higher oil prices are not good for airlines
Meanwhile, airline stocks have been landing lower. $United Airlines (UAL.US)$ fell 12% in five days. Also note that on Friday we saw $Qantas Airways Ltd (QAN.AU)$ fell 5%, $Flight Centre Travel Group Ltd (FLT.AU)$ fell 5.1%, $Corporate Travel Management Ltd (CTD.AU)$ fell 4.6%.
Fed meeting this week could add to selling pressure
While investors will question how long this could go on, and if the Strait of Hormuz will be blocked, cutting off 21% of the world’s oil supply, we’re seeing some investors betting (via options) that oil will get to US$95. This would cause inflation to further spike. Not good, especially in a week where several central banks are meeting (the Fed, Bank of Japan, Sweden, Switzerland). You should expect the Fed to suggest uncertainty around trade and concerns about inflation, which could trigger selling in technology and consumer discretionary stocks. So investors should beware of that.
Expect investors to rotate out of tech, airlines and move into defense, gold and oil
For the Aussie market, we’re expecting a fall of 0.2%, according to futures. But broadly expect investors to rotate (sell) out of airlines, technology, real estate, and consumer discretionary stocks, and move heavily into gold, oil, and defence-related investments.
The three new certainties amid war-time tension. Also, expect airlines to be the talk of the town ahead of Virgin’s listing on the ASX next week, at such a terrible time. It’s not good for Virgin or any airline for that matter, as fuel accounts for about 25% of an airline’s expenses. And when we see prices up 19% in a month, you should expect airlines to fall, and $Virgin Australia Holdings Ltd (VGN.AU)$ to face hard times after listing.
Markets are telling us what to look at
Investors who want to make money right now will be looking at what markets are telling us. And that is that oil and gas and gold stocks are charging higher. You can see that by looking at the best and worst performers on the ASX on Friday. It shows you that oil and gas and gold stocks were up significantly in one day alone. Oil and gas stocks such as $Karoon Energy Ltd (KAR.AU)$ rose 11%, $Woodside Energy Group Ltd (WDS.AU)$ gained 7.4% and gold stocks following such as $Capricorn Metals Ltd (CMM.AU)$, $Westgold Resources Ltd (WGX.AU)$, $Newmont (NEM.US)$.
Oil stocks could see a short squeeze. M&A ramps up, as highlighted by Santos' takeover
There are two things to be mindful of. The first one is to expect a short squeeze in oil stocks. Viva Energy $Viva Energy Group Ltd (VEA.AU)$ is a great example, it was one of the most shorted stocks according to filings that Bloomberg only published for the week ending June 6. Still, this is something to be aware of, and why you expect higher prices for oil stocks and technical positions (shorts) to be closed off which could push oil stocks even higher.
Secondly, oil and gas M&A ramping up, with Santos $Santos Ltd (STO.AU)$ agreeing to a $8.89 per share takeover, for $30 billion by Adnoc. This highlights that the world is moving quickly to get its hands on oil. Santos is Australia's second biggest oil and gas producer after Woodside Energy $Woodside Energy Group Ltd (WDS.AU)$.
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Cryptocurrencies
Bitcoin was up 0.6% at US$105,416. Ethereum up 1.11% at US$2,543. Updated 10.34am AEST
Commodities
Iron ore last traded up 0.2% at US$94.35. Down 4.1% YTD. Updated 10.49 am AEST.
The gold price is up 0.1% at US$3,437 per ounce. Up 3.3% in five days. Up 31% YTD.
Crude oil is up 1.1% at US$73.79 per barrel. Up 13% in five days. Up 5.6% YTD as at 10.50 am AEST
What’s ahead
• Companies reporting in focus include Lennar who repots on Monday. CarMax who reports on Friday in the US, as well as Accenture. Next week Virgin listed on ASX, Metcash reports results along with Colins Foods.
• Economic news to watch includes Chinese industrial production and retail sales out Monday, tomorrow BOJ interest rate decision and US retail sales.
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Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Jessica Amir
Moomoo Official Market Strategist
moomoo, market strategist.
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151453268 witso : Morning Jess, your a true Supercoach the team should get heavily into Gold and gas heavier the better, i dont think the oil price will stump gold now so go for it while the other teams fight amongst themselves.
Ironman Latest Mark : how about renewable energy ?