Aussie Dollar Reaches Loonie Parity, Brent Holds Under $100

Summary

The Australian dollar reached parity with the Canadian dollar for the first time in over eight years, while Brent held below $100 a barrel as Saudi Arabia swiftly restored East-West pipeline flows. Wall Street futures were flat, European futures edged up and Asian stocks faded after five straight sessions of gains. SoftBank's $10 billion-plus debt deal reportedly drew over $20 billion of demand, while Treasury futures firmed ahead of Xi Jinping's Washington visit.

Equities

The FTSE 100 closed 0.29% lower at 10,708.33 points on Tuesday, as declines in banks and telecoms weighed on the index. The FTSE 250 performed better, closing 0.14% higher, while investors watched developments around possible US-Iran talks and improving oil flows through the Strait of Hormuz.

Kingfisher jumped 12.4% on Tuesday after the home improvement retailer raised its full-year profit outlook following a 9.9% increase in first-half earnings. Smiths Group climbed 7.5% after beating expectations for full-year operating profit and starting a process to sell its US asbestos liability, while Oxford Biomedica gained 6% after reporting a 9% year-on-year increase in first-half revenue.

Banking shares reversed some of Monday’s gains, with HSBC closing 1.6% lower on Tuesday and Standard Chartered dropping 2.9%. BT Group fell 3.8%, Vodafone declined 2.2% and Airtel Africa lost 1.9%, while Diageo rose 1.5% and Unilever gained 1.2%.

In the US, the S&P 500 finished Tuesday essentially flat at 7,764.64 points, remaining less than 0.5% below its August record closing high. The Nasdaq rose 0.45% to a record 27,244.28, while the Dow Jones Industrial Average closed 0.36% lower at 51,863.69.

Micron Technology climbed 5% on Tuesday and Sandisk gained almost 7% as AI-related semiconductor shares continued their recent advance. The gains came as Meta Platforms’ Muse AI assistant attracted strong interest following its launch this month, supporting chip stocks while putting pressure on companies that could face greater competition from AI agents.

Charles Schwab dropped 6.1% on Tuesday, Airbnb fell 3%, and Uber and Lyft each declined by more than 1% amid concerns about competition from AI assistants capable of handling transactions and consumer services. JPMorgan Chase and Wells Fargo both lost more than 3%, contributing to a 1.68% fall in the S&P 500 financial sector.

Forex & Commodities

The US dollar strengthened to a two-month high early on Wednesday as markets continued to assess the prospect of further interest-rate increases. The dollar index rose to 100.7, while the euro weakened to $1.143 and sterling slipped to $1.332.

The Japanese yen remained under pressure early on Wednesday at 157.6 per dollar. The Bank of Japan raised interest rates to a 31-year high last week, but the move failed to close the yield gap after the US Federal Reserve increased rates by the same amount two days earlier, while the threat of Japanese intervention remained in focus.

Spot gold fell 0.2% to $4,346 an ounce early on Wednesday as the stronger dollar and expectations that major central banks will keep interest rates higher weighed on demand. The Federal Reserve raised its benchmark rate by 25 basis points last week to 3.75%–4.00% and indicated another increase could come before the end of the year.

Boston Fed President Susan Collins said she supported last week’s rate increase because of the risk that inflation remains above the central bank’s 2% target. She did not indicate whether she favours another increase, while the Bank of Japan and European Central Bank have also recently raised rates.

Oil extended its decline early on Wednesday, with Brent crude falling 1.1% to $98.16 a barrel and West Texas Intermediate dropping 1.67% to $89.01. Both benchmarks have now fallen for six consecutive sessions to around two-week lows.

Prices were pressured by an improving Gulf supply outlook and renewed hopes for talks to end the US-Iran conflict. Saudi Arabia restarted its East-West Pipeline on Tuesday, restoring a route used to divert around 4 million barrels per day away from the Strait of Hormuz, while Iraq is also increasing exports.