Stocks extend rally on Gulf breakthrough hopes, oil near two-month lows
- All eyes are on the hotly-awaited market debut of Elon Musk's SpaceX, which has made history with the biggest-ever initial public offering
SYDNEY: Asian stocks joined a global rally on Friday on hopes a Middle East peace deal may finally materialise, while the dollar and bond yields dropped and oil prices fell to two-month lows, tempering inflation fears.
All eyes are on the hotly-awaited market debut of Elon Musk’s SpaceX, which has made history with the biggest-ever initial public offering.
The IPO raised a record $75 billion, valuing the rocket and spacecraft manufacturer at $1.77 trillion and making Musk the world’s first trillionaire.
US President Donald Trump said on Thursday that a peace deal could be signed as soon as this weekend, hours after threatening more strikes on Iran. He said negotiations with Tehran had advanced to the highest levels of Iran’s leadership and had been approved by a broad coalition of regional powers.
Trump’s remarks follow repeated bouts of optimism from the president that have failed to yield a deal, keeping markets on edge.
Nonetheless, “this does look perhaps a bit more tangible than we have had,” said Ray Attrill, head of FX strategy at National Australia Bank.
“If we hear something from Iran that sounds positive, the odds (of a peace deal) are clearly going to flip quite dramatically.”
The deal, if confirmed, would be the most significant diplomatic breakthrough yet to end the three-month-old war, which has sent global energy prices sharply higher.
The European Central Bank had to raise interest rates for the first time in nearly three years on Thursday to nip war-driven inflation in the bud.
Oil prices slumped to two-month lows on the news of an agreement before trimming some of the losses. U.S. West Texas Intermediate (WTI) crude futures were last down 1.2% to $86.69 a barrel, on top of a 2.6% drop overnight. Brent dropped 1.1% at $89.40 per barrel, having fallen nearly 3% overnight.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 3.2%, led by a 7.4% surge in South Korea’s KOSPI. Japan’s Nikkei rose 2.7%.
China’s blue-chip CSI300 rose 1%, while Hong Kong’s Hang Seng gained 1.3%.
Overnight, Wall Street rallied with the three major indexes registering their biggest daily gains since April 8, when the U.S. and Iran agreed to a temporary ceasefire. The Nasdaq jumped 2.5%, helped by expectations of a strong market debut for Musk’s SpaceX.
IG estimates the expected market cap of SpaceX at the close of business on day 1 would be just over $2.4 trillion.
“It suggests that SpaceX’s market cap … will be about 35% higher than the $1.78 trillion valuation set for the IPO,” Tony Sycamore, analyst at IG, said in a note. “This, in turn, suggests the SpaceX share price will likely finish today somewhere in the ~$175/$180 range.”
Treasuries held onto gains as hopes of a peace deal in the Gulf led markets to trim bets of a rate hike from the Federal Reserve this year. Pricing for a hike in October has come down to 36% from 51%.
Two-year Treasury yields were steady at 4.074% on Friday, having slumped 6 basis points (bps) overnight. Benchmark 10-year Treasury yields held at 4.4710%, after falling almost 8 bps overnight.
The dollar stabilised after overnight losses. It rose 0.2% to 160.20 yen , after retreating 0.4% in the prior session. Traders are still on high alert for intervention from Japanese authorities as the yen stays close to the 160 level that many see as a line in the sand.
The Australian and New Zealand dollars , were down about 0.3% each against the greenback, following overnight jumps.
Precious metals resumed declines on Friday. Spot gold slipped 0.6% to $4,189 an ounce, following a 3.5% jump overnight, while spot silver also fell 0.6% to $66.93 an ounce, after a 5.8% gain.
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