ASX set to slide as oil prices rise; $A stronger

European stocks were weighed down by higher oil prices and a drop in Novartis following the failure of a heart drug, while Wall Street was closed for the Labor Day holiday.

The Stoxx Europe 600 Index was little changed at the close in London. Energy stocks outperformed, buoyed by higher commodity prices after the US and Iran traded strikes on tankers, while the media and insurance sectors were among the biggest laggards. US stock futures fell in cautious trading. S&P 500 futures dropped 0.2 per cent while Nasdaq 100 contracts gained.

The Australian sharemarket is set to retreat, with futures at 4.51am AEST pointing to a fall of 7 points, or 0.1 per cent, at the open. The ASX edged 0.1 per cent higher on Monday. The Australian dollar was trading higher at US72.18¢.

Novartis shares fell 3.2 per cent, the most they have retreated, since April on news that pelacarsen, a potential blockbuster cholesterol drug, failed in a final-stage study. Semiconductor supplier SOITEC rose 12 per cent, outperforming peers in a strong day of trading for AI-adjacent names including Infineon Technologies, which gained 6.9 per cent after an upgrade at MP Capital Markets.

Brent crude traded near $US98 per barrel, its highest level since July, after US attacks on Iranian tankers and Tehran’s threat of a new restricted zone outside the Strait of Hormuz raised concerns about prolonged disruptions to energy flows through the waterway. Iran also said a deal with Oman to manage shipping through the strait is imminent.

“It appears that everyone has digested a world with slightly higher baseline oil,” said Andrea Gabellone, head of global equities at KBC Securities.

Europe’s sensitivity to energy prices hasn’t stood in the way of a strong second-quarter earnings season and an overall constructive mood among investors that’s rooted in upbeat macroeconomic data. The benchmark Stoxx 600 is less than 2 per cent away from its all-time closing record, though it has edged lower in three out of the past four weeks.

“There is a clear cyclical recovery in manufacturing, the PMIs provide clear evidence of this,” said Geoff Yu, a senior macro strategist at Bank of New York Mellon. “Valuations and positioning also help, but it feels like the market is tactical, and of course energy costs this winter will be problematic.”

In other single stocks, Nordex SE shares rose as much 12 per cent after the wind turbine maker was upgraded at Bank of America.

Bloomberg

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