ASX ends up slightly as relief rally fades; oil rebounds above $US100

A rally in Australian equities cooled into the close after optimism around a potential de-escalation in the Middle East faded on reports US allies in the region could join the fight against Iran.

The S&P/ASX 200 Index closed up 13.50 points, or 0.2 per cent, to 8379.40 on Tuesday, rebounding from a 10-month low in the previous session. Nonetheless, it was well off its intraday peak of 8504.60.

Optimism quickly faded as US futures reversed gains and oil rose above $US100 a barrel after The Wall Street Journal reported that US allies in the Persian Gulf are moving closer to active involvement in the conflict.

Equities initially rocketed after US President Donald Trump said he would postpone military strikes against Iranian energy infrastructure for five days because of productive talks with Tehran to end hostilities.

While the Iranian regime has denied any discussion, Brent plunged as much as 11 per cent to below $US100 per barrel before climbing back to $US103 in Asian trading.

“Trump stepping back from striking Iran’s energy assets takes the worst-case scenario off the table, but for this optimism to have real legs we need to see credible co-operation from both sides, and Iran hasn’t affirmed that,” Minotaur Capital portfolio manager Thomas Rice.

“Given how many yo-yo moves we’ve already had during this conflict, it would be premature to assume one headline has taken geopolitical risk off the table.”

ASX energy stocks were mixed as Ampol rose 1.2 per cent to $33.83, Woodside Energy fell 0.2 per cent to $34.73 and Santos down 2.6 per cent to $7.84 as it suffered an unexpected breakdown of its new $6 billion Barossa gas project in the Timor Sea.

Australian mining stocks gained the most in almost a year as bargain hunters piled back in and copper rallied.

BHP climbed 3 per cent to $48.52 and Rio Tinto by 2.2 per cent to $147.56. Gold miners rebounded even as the precious metal slid to $US4340. Genesis Minerals rallied 6.9 per cent to $5.72 and Newmont by 3.9 per cent to $136.99.

The prospect of de-escalation in the Middle East weighed on DroneShield, which dived 6.8 per cent to $3.57, while fellow counter-drone stock Electric Optic Systems eased 6.7 per cent to $8.34.

Banks were mixed as ANZ climbed 0.5 per cent to $36.45 while National Australia Bank dropped 4.5 per cent to $171.12 as JPMorgan and Morgan both downgraded the bank’s rating.

Stocks in focus

In company news, Myer fell 1 per cent to 28.7c after falling short of market expectations in the first half even as profits grew by 32.8 per cent to $40.3 million.

Downer EDI firmed 2.3 per cent to $7.71 after it secured a $500 million integrated facilities management contract with Stockland.

Lovisa gained 0.2 per cent to $21.12 as chairman Brett Blundy bought the dip, acquiring $5.3 million worth of shares in the jewellery chain after a $6.7 million buy-in last week.

Orica fell 0.9 per cent to $18.77 as it faced an unplanned outage at its Kooragang Island ammonia plant, coming at the same time as a separate outage at an ammonia plant in the Pilbara.

And KMD Brands advanced 3.2 per cent to 16¢ after it dismissed a push to demerge the company’s Rip Curl brand and merge it with US surfwear group Stokehouse.