Just when the stock market was expected to have a bad day at the office, Mr T says a peace deal with Iran is in the wings. Is he on the money here?
What we’re looking at now is one of the most important episodes of ‘Deal or No Deal’ as President Trump has pitched (to financial markets in particular) that the US and Iran have had “very good and productive conversations”.
If true, this could prevent billions being wiped off our super balances and investment portfolios, as Iran threatened to target key energy infrastructure across the Middle East, following the Trump threat to “obliterate” his enemy’s power plants.
The value of our country’s shares has shrunk by over $300 billion since February 28 when bombs started raining down on Iran. Before this overnight Trump revelation that he’s trying to make a deal with Iranian officials to end the war, Wall Street boomed to the positive, with the Dow up over 900 points (or 1.9%) with an hour left to trade, while the broader S&P 500 index was up 1.6%. And the most beaten up index — the Nasdaq — was up 1.8%.
What Trump and Israel had taken away i.e. a positive stock market and unleaded petrol around $1.60 a litre, could start to return to a more normal positive market and lower petrol prices. That said, petrol prices will be slow to fall and will hinge on the course of peace talks that will then impact on oil prices.
The consequences of this war and then a resolution will be more positive for stocks that have really only reacted to the fear of spiking inflation and a growth-killing recession. However, because so much Middle East oil and gas infrastructure has been damaged or destroyed, we could be stuck with higher-than-normal petrol prices for some time.
This means while we’re more likely to cop higher inflation and therefore higher interest rates, at least a recession is less likely. This is what the US central bank boss Jerome Powell indicated last week as he gave a reasonable outlook assessment as his Federal Reserve team said ‘No’ to a rate cut.
While Powell did imply the implications of the war on the economy will be a key determinant of what the Fed does with rates, he wasn’t over-concerned about a slowing US economy. This is good news for the global economy and an exporter nation like Australia.
But let’s keep this in context because we are talking about good news delivered by Donald Trump, who’ll never go down in history as a 100% reliable source. Who could ever know what this guy is up to as he sets his sights and desires on outcomes that no normal person can expect to comprehend.
While Trump’s unpredictability is his unique calling card, we do know he hates stock markets hating him. He sees a rising stock market as a glowing report card on his performance as US President. He wouldn’t want his fellow Americans paying the US$4 plus a gallon they’re enduring now, especially with mid-term elections in November.
Ahead of this Trump revelation overnight, the stock market was bracing for another bad day at the office, but now SPI Futures are saying we should see a 160-point opening for the local stock market. And the Aussie dollar is on the rise to 70.17 US cents.
Of course, while we still have to see Trump pull off a peace deal, ahead of that, the oil price should fall from its high of US$112.84 a barrel that we saw yesterday.
That led to bond market madness as the AFR’s Alex Gluyas revealed. “Bond markets were similarly chaotic and, at one point on Monday, suggested the Reserve Bank of Australia would raise rates four more times this year, to their highest level since 2008,” he reported. “That forecast has since been moderated.”
It will be moderated down again on this Trump news. That’s why we have to hope that Donald can pull off the deal of his life (if you can forget that him becoming the US President, twice, was even a bigger deal that he pulled off with American voters!).
Trump says there’ll be five days of no bombing. We have to hope he and his Iranian counterparts can make this deal happen. Stock market players and our super fund managers will be waiting with bated breath for every news item that comes out of the White House and Tehran this week.
For the record, the Dow ended up 631 points (or 1.38%), the S&P 500 rose 1.15% and the Nasdaq put on 1.38%. These slight pullbacks mightn’t have happened if the Iranian leadership was inclined to be as positive about a resolution as DJT.
ABC 7.30 report some nights ago interviewed the Israel opposition leader who stated that Israel’s goal in this war is not just to neutralise the Iranian miltary’s operational capacity to deliver terrorist attacks on Israel, but also to ultimately deliver regime change in Iran.
He also stated that should the US pull (chicken ) out, these goals do not change, and Israel will continue its military operations until they are achieved.
So has Donald Duck somehow convinced Israel to abandon its goals to enable Donald’s advertised End of War Deal to occur?
Or has Donald just absent mindedly forgotten that Israel is his partner in this war, and they don’t dance to tune of the US stock market or the nearest Republican election popularity polling.
My guess is it’s the latter.
Maybe “Planet America” is right, and Donald will just have to release more of the Epstein files to take American’s minds off the war he started to take American’s minds off the Epstein files!!!!