Good morning, and welcome to the ABC’s finance blog. I’ll be guiding you through the latest market action for the next few hours.
The Australian share market is on track to start its day around 0.5% higher, according to ASX futures.
It will probably follow a positive lead from Wall Street, which received a boost from softer-than-expected US inflation data overnight — despite rising hostilities in the Middle East.
The Dow Jones Industrial Average was flat at 52,509 points, while the S&P 500 rose 0.4%, to 7,544 points and the Nasdaq Composite gained 0.9%, to 26,107 points.
Middle East escalation
US forces carried out attacks for a fourth night in a row after Tehran said it had closed the Strait of Hormuz,
The US airstrikes occurred shortly before it reimposed a naval blockade on Iran’s ports and coastal areas.
US President Donald Trump, meanwhile, has abandoned his demand that ships pay a 20% protection fee on their cargo to cross the Strait of Hormuz under US military protection.
Mr Trump said the Gulf states would invest in the US as repayment instead.
This led to a sharp rise in oil prices, with Brent crude futures up by another 2.9% to $US85.72 per barrel.
Renewed attacks since last week have increased doubts that a memorandum of understanding signed last month would lead to a permanent halt in the war, which has disrupted global energy supplies and stoked inflation fears globally.
Inflation surprise
In the United States, the Consumer Price Index rose 3.5% in the year to June, which was much lower than the market’s expectations for a 3.8% rise.
These new figures from the US Labor Department showed inflation cooled more than analysts expected. It was largely due to lower petrol prices amid last month’s signs of progress in US-Iran peace negotiations — which have since fallen apart.
As a result, financial markets were pricing in an 83% likelihood that the US Federal Reserve will keep interest rates on hold at the conclusion of its July policy meeting, up from 58.3% on Monday.
Though markets expect at least one 25-basis-point rate hike before the end of the year, according to CME’s FedWatch tool.
Anyway, please grab a coffee, tea or whatever you normally have in the morning, and I’ll have more updates for you shortly!
– with reporting by Reuters
