CommSec markets analyst James Gruber has flagged a 1.7% drop at the ASX 200 open on Friday, May 8, after Iran publicly rejected a US-led draft peace plan as 'unrealistic' - a reversal that pulled US benchmarks off record highs and reignited oil-price volatility heading into the Australian session.
Speaking on CommSec's morning report, Gruber said the proposed three-stage deal 'formally ending the conflict, resolving the blockade and crisis over the strait of Hormuz, and then launching a 30-day window for negotiations on a broader agreement' had appeared close to landing earlier in the week. Iran's response broke that. 'Iran is describing the plan as unrealistic and it says it won't allow the opening of the strait and for the US to exit the conflict without paying any reparations,' Gruber said.
The local response is set up to be sharp. 'The ASX is poised to open lower with index futures down 1.7%. That's a pretty big fall given what's happened overseas,' he said, noting that Wall Street's pullback was modest in comparison: the Dow finished down 0.6%, the S&P 500 was 0.4% lower and the Nasdaq slid 0.1%.
Gruber's report comes off a strong Thursday for the local benchmark. 'Yesterday it finished in positive territory for the second straight day. The market gained 1% to 8,878 and crossed above its 200-day moving average,' he said. Seven of the eleven sectors rose, led by miners up 3.7%, although energy lagged on softer oil. The 200-day cross is technically meaningful - it is the line many systematic funds use to flip between offence and defence on the Australian benchmark.
Oil prices remained the cleanest barometer of the breakdown in negotiations. Brent crude futures 'settled down 1.2% to just above US$100 a barrel,' Gruber said, after Iran pushed back on the strait-of-Hormuz reopening. Gold advanced for a third straight session to settle up 0.5% at US$4,711 an ounce, and iron ore held firm at US$110.95 a tonne.
In currencies, the Australian dollar slipped 0.4% to just above 72 US cents as risk appetite faded. The 10-year US Treasury yield 'was three points higher to 4.38%' and the two-year was up four points to 3.91%, both moves Gruber attributed to oil clawing back ground through the day.
The single-stock picture in the US session highlighted how concentrated the action has become. ARM Holdings 'slid 10%' after the chip designer's strong forecast was overshadowed by AI-supply concerns. Whirlpool 'slumped almost 13%' after missing first-quarter sales estimates and suspending its dividend. The standout move came from cybersecurity. 'Data Dog surged 30% while peers Crowdstrike and Palo Alto Networks added 8% and 7% respectively,' after Datadog raised its full-year earnings forecast.
European markets fared worse than the US. The continent-wide FTSE Eurofirst 300 closed 1.1% lower and the UK FTSE 100 fell 1.6%, with German defence group Rheinmetall down almost 7% after first-quarter results and a bid for German naval yards Keel.
The Australian session has its own catalysts to absorb on Friday: earnings updates from Macquarie Bank, QBE, REA Group and News Corp, plus US April unemployment data due in the Australian afternoon. With futures down 1.7% and Brent below US$100, a clean read on the local banking sector - and any further leak from the Iran negotiating table - is now the day's setup.