Blog week ending, 6th March 2026
Markets:
- Local and global equity markets trended lower during the week as uncertainty over the emerging conflict weighed on sentiment. Europe and emerging markets, particularly Korea, recorded the sharpest declines.
- Markets initially looked past the US-Isreal strikes on Iran, consistent with recent years’ reactions to geopolitical flare-ups. Most of the market impact was concentrated in commodity prices especially oil and gas.
- In a surprising market reaction, US government bond yields and the US dollar both rose, while gold prices fell, even as Middle East tensions escalated, an unusual combination of moves.
- Australian company profits rose 4.8% in the December quarter, driven by higher mining profits. Outside the mining sector, profit growth was less positive and mixed. Sales volumes increased broadly in line, while total wages paid by businesses rose 5.6% over the year.
- In local news, Magellan Financial Group and Barrenjoey Capital Partners agreed to merge, valuing the upstart Australian investment bank at about $1.62 billion. Magellan previously held a 36.4% stake in Barrenjoey.
- Oil prices rocketed to their highest level since July 2024 following coordinated US and Israeli strikes on Iran, significantly escalating Middle East tensions. The Strait of Hormuz remains closed, disrupting a key passageway for roughly 20% of global oil supply.
- Qatar halted LNG production at the world’s largest export facility after it was targeted in an Iranian drone attack, sending European gas prices surging more than 50% higher.
- The US dollar strengthened to its highest level since mid-January, reflecting heightened safe-haven demand amid the regional conflict. The Australian dollar slipped only modestly in comparison.
- The Bank of Japan warned it may intervene in currency markets to stem the Yen’s weakness, while the Swiss National Bank signalled greater willingness to counter the safe-haven appreciation of the Swiss Franc.
Economics:
- The Australian economy grew 0.8% in the December quarter, accelerating from 0.5% growth in the prior quarter and beating expectations. Growth was supported by private demand, through public spending and investment remained the stronger driver. Net exports detracted from growth, while the household savings ratio rose sharply.
- RBA Governor Michelle Bullock signalled that a March rate hike is possible, indicating the Bank may not wait for first-quarter inflation data before making its decision.
- Australian building approvals fell 7.2% in January, extending the weakness seen after Decembers 15% drop. The decline was led by a sharp 24.5% fall in private-sector multi-unit approvals, while detached dwelling approvals rose 1.1%.
- US core producer price inflation jumped 0.8% in January, well above expectations and the fastest pace since March 2022. The goods component softened overall, but core goods (ex-food & energy) picked up, whilst services also accelerated.
- US private businesses added 63,000 jobs in February, the strongest gain since July following a downwardly revised increase of 11,000 in January. The result exceeded forecasts.
- US manufacturing eased in February, missing expectations but still signalling expansion, marking the sector’s seventh consecutive month of growth.
- A key US services activity index strengthened in February, beating expectations and reaching its fastest pace of expansion since August 2022. Business activity, new orders, and employment all improved.
- Euro area annual inflation rose to 1.9% in February, up from January’s 16-month low of 1.7% and above expectations. Price pressures increased in services and non-energy industrial goods, while energy prices continued to fall, and food and alcohol remained steady.
- Eurozone manufacturing returned to expansion in February marking the strongest improvement in operating conditions since June 2022. Manufacturing output rose again and new orders increased at their fastest pace since April 2022.
- Japan’s unemployment rate rose to 2.7%, its highest level in five months, while Tokyo inflation eased as government energy subsidies took effect.
- Chinese manufacturing activity slipped in February, remaining in contraction and coming in slightly below market forecasts. It was the weakest reading since October and the second consecutive month of decline in factory activity
Politics:
- US and Israeli attacks on Iran resulted in the deaths of key Iranian leaders, prompting Iran to retaliate with attacks on Israel and US bases across the Middle East. President Trump signalled the bombing campaign may continue for several weeks, with regime change appearing to be the underlying objective.
- Iran’s strikes on neighbouring Middle Eastern countries have drawn them into the conflict, while several European nations continue to consider the extent of their involvement. President Trump also threatened to cut off US trade with Spain after it initially refused US access to one of its air bases.
- The White House has formally submitted the nomination of Kevin Warsh for Federal Reserve Chair to the US Senate.
Written by Christopher Lioutas
Chairman – Harbourside Investment Management
