Geopolitical tensions triggered by the Trump administration’s inflammatory threat of an “economic D-Day” targeting Iran and its commercial partners failed to derail a bullish rally on Australia’s primary stock exchange on Tuesday, pushing the benchmark index to its highest level in two weeks.
The S&P/ASX 200 closed the trading session at 9164.6 points, climbing 61.5 points or 0.68% after late-session buying from traders locked in solid gains across most market sectors. While newly announced US sanctions targeting companies, individuals and oil tankers facilitating Iranian crude exports pulled the local energy sector into negative territory, only the real estate segment joined energy in closing lower. Healthcare, technology and consumer staples all posted strong double-digit gains to lead the upward trend, with nine out of the ASX’s 11 sectors finishing the day in positive territory.
Carol Kong, a senior economist at Commonwealth Bank of Australia, noted that market participants are increasingly skeptical that US Treasury Secretary Steven Mnuchin will follow through on the sweeping sanction threats. “We do not expect China – Iran’s largest trade partner – to bow to US pressure to cease all commerce with Iran,” Kong explained. “Our analysis suggests the US will prioritize regional market stability over further escalation ahead of the planned Trump-Xi summit scheduled for next month.”
Major Australian energy producers bore the brunt of geopolitical jitters: Woodside Energy dropped 1.4%, Santos fell 1.3%, and Viva Energy slid 3.2%. Against this backdrop, technology stocks staged a broad rally. Embattled logistics software firm Wisetech Global rebounded 4.6%, cloud accounting platform Xero gained 2.6%, and communications technology firm Codan added 2.7%. IT services provider Data#3 extended a huge previous-day rally triggered by strong full-year financial results, climbing an additional 5.8% on Tuesday. DroneShield, a leading drone defense technology firm, rose 7.4%, while buy now pay later provider Zip Co gained 5.6%.
The consumer staples sector got a major boost from supermarket giant Coles Group, whose shares jumped 4.9% after the release of its annual report that exceeded market expectations. Josh Gilbert, a market analyst at eToro, noted that Coles has spent years urging investors to wait for returns from its large-scale automation investment program, and the latest results confirm that patience has paid off. “The most encouraging element of this result is that Coles delivered higher profits without relying on excessive price increases for consumers,” Gilbert said. The chain’s automated distribution centers are now profitable, and while liquor division earnings fell nearly 50% year-on-year, the bank secured $311 million in annual cost savings, while project and dual-running warehouse costs fell by $103 million. Gilbert added that even with the strong result, some investors have expressed mild caution as the chain prepares to enter a new capital spending cycle before distributing full returns from the last round of investment.
Healthcare stocks also posted strong gains, with the sector climbing 1.4% overall. Global biotech leader CSL gained 2.7% after a challenging 12-month period, while safety product manufacturer Ansell led the sector with an 8.2% jump, extending a 9.6% rally from the previous trading day following the release of solid full-year earnings. Analysis from Morgan Stanley shows that active Australian fund managers continue to hold healthcare as their largest overweight position, while they have also expanded their overweight holdings in the IT sector – a bet that paid off handsomely in Tuesday’s trading.
In the commodities segment, mining giant BHP added 0.8% to hit a second consecutive all-time closing high. Gold is on track for its best monthly performance since 1999, with prices up 19% month-to-date amid rising global geopolitical uncertainty. Global oil prices edged higher on the back of US-Iran tensions, offsetting early market concerns about supply disruptions.
A handful of smaller caps also posted striking gains on Tuesday. Off-road accessories manufacturer ARB saw its shares surge 13.9% even after the firm reported a 3.8% drop in annual sales revenue to $702 million and a 5.2% fall in after-tax net profit to $92.4 million compared to the prior financial year. Sustainable investment firm Australian Ethical saw its shares rocket 14.8% after announcing that total funds under management rose 4% to a record $14.5 billion, while full-year net profit after tax jumped 29% to $25.7 million for the 12 months ending June 30. The company confirmed it had delivered both record assets under management and double-digit earnings growth for the reporting period.