Warnings of an energy supply shock that would impact Australia quite severely
The Australian share market has closed down 1.3 per cent for the week. While Wall Street has consistently pushed record highs recently, the consensus on the local market seems to be that Australia continues to struggle with inflation and mixed results from corporate earnings. State Street Investment Management senior strategist Clive Maguchu warns Australia may also be yet to feel the full negative economic impact of the Iran war. “So the fact that the ceasefire is happening doesn’t mean that energy supplies are getting through the Strait of Hormuz — one or two ships going through a day. That’s not nearly enough for the world in terms of energy supply. So we do think there is the potential for an energy supply shock that would impact Australia quite severely … For now, many countries are drawing down oil inventory supplies … So we’re not too worried about it in the short term, but the longer this goes on, the more we should be concerned about that.” By the close of trade, the ASX 200 had fallen just a fraction, shedding 9 points or 0.1 per cent on Friday, but the index is down 1.3 per cent for the week and 6.2 per cent since its record high in late February. The index closed at 8,630.
The US technology giants continue to defy the doomsayers reaching new market capitalisation highs on stronger-than-expected earnings. Nvidia now has a market valuation of $US5.7 trillion. “So at the moment, you’ve got very strong corporate earnings, pretty much globally. You’ve got strong CapEx coming through, particularly from the big AI players, and you’re starting to see some return on that investment.” He said.
Clive Maguchu also says the Australian stock market reaction to the Iran war is distinctly different from the US equity market response. “The inflation pass-through in the US is not quite as strong as it is here, because obviously the US is an energy exporter, a net energy exporter, and they don’t see the impact of the energy price shock as much as we do. So there is reasons for US companies to be doing well, and the earnings that they’ve been exhibiting over the last week or two has been very strong,” he said.
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