Global Markets Surge on AI Earnings and Middle East De-escalation Hopes

Market snapshot

By David Chau

ASX 200: +0.6% to 9,197 points (live data below)

Australian dollar: steady at 70.45 US cents

Wall Street: S & P 500 (+1.8%), Dow (+1.7%), Nasdaq Composite (+2.6%)

Europe: FTSE (+0.2%), Stoxx 600 (+0.7%)

Asia: KOSPI (+4.4%), Nikkei (+1%)

Spot gold: -0.1% to $US4,072/ounce

Oil (Brent crude): -0.8% at $US78.73/barrel

Iron ore: -0.1% at $US93.55/tonne

Bitcoin: -0.5% to $US63,989

Prices current at 10:18am AEST

Before I sign off and hand over the blog to my esteemed colleague Gareth Hutchens, here's a quick look at what else is happening on markets.

Locally, the ASX 200 climbed to a new record high for a very short period of time this morning, before wiping out most of those gains.

And it wasn't just the Dow Jones and S & P 500 which hit new peaks. Europe's Stoxx 600 index also rose to its highest level ever overnight, rising 0.7% to 657 points.

On currency markets, the Australian dollar is currently buying 110.9 Japanese yen.

Last week, it was trading much higher, above 114.

ASX briefly hits record high, then erases nearly all its gains

I should also point out that the Australian share market briefly hit a new record high a short time ago.

Within the first 10 minutes of trade, the ASX 200 climbed as high as 9,213 points.

But first, here's a brief recap:

The last time we saw an intra-day high like that was back in late February (at 9,203 points).

But the record closing high happened on March 2, when the market closed at 9,201 points.

But since that brief flirtation with a new record in early trade, the ASX has some of its momentum. So it was probably too soon!

Right now, it's up 0.1% to 9,155 points. So it's practically flat, meaning the enthusiasm has completely evaporated!

Hopes of Middle East de-escalation lead to sell-off across ASX oil and gas stocks

At the other end of the spectrum, the worst performing sectors are energy (-1.6%), utilities (-1%) and consumer staples (-0.7%).

Oil and gas stocks like Woodside Energy (-2.8%), Karoon Energy (-2.2%), Santos (-1.6%) and Beach Energy (-1.1%) are seeing the heaviest losses this morning.

Their share price movements are linked with the oil price.

Brent crude fell more than 5% overnight after officials from the United States and Qatar made upbeat claims about the US-Iran making progress towards de-escalation and that the Strait of Hormuz could reopen by "tomorrow".

Keep in mind — those claims have been made many times in the past and have often led to disappointment or hostilities resuming soon afterwards.

Surge across mining and critical minerals stocks driving ASX higher

About half the sectors on the Australian market are trading higher, with materials (+1.9%), consumer discretionary (+0.8%) and healthcare (+0.7%) in the lead.

In comparison, the ASX 200 index is up 0.6% to 9,196 points.

Many of today's best performing stocks are companies specialising in : critical minerals: IperionX, Lynas Rare Earths, Iluka Resources, Elvra Lithium, Capstone Copper; technology: Life360 and WiseTech Global.

It seems the 'energy transition' trade is in vogue this morning.

ASX records higher-than-expected gain in opening trade

The Australian share market has started its day with larger-than-expected gains.

The ASX 200 was up 0.6 % to 9,202 points by around 10:15am AEST.

We'll have more updates for you shortly on what's driving the market higher.

SpaceX's space revenue jumps, Elon Musk dismisses reports of plans to sell Tesla's China business

Starship, SpaceX's next-generation reusable rocket system, is yet to enter commercial service but is expected to enable deployment of higher-bandwidth Starlink satellites and orbital AI-computing infrastructure.

Space revenue grew 29% year over year.

The company's ability to turn Starship into a reliably reusable vehicle is central to its longer-term strategy.

Investors have closely watched for updates on testing progress, launch cadence, reusability milestones and the vehicle's satellite-deployment capabilities.

Separately, SpaceX said it had partnered with Nvidia to use its chips in the Starmind AI1 orbital compute satellites.

The space segment, which includes commercial launches, government missions and development of Starship, remains a significant source of costs and uncertainty.

While launch activity for Falcon — SpaceX's partially reusable workhorse rocket — has remained robust, revenue can vary with the mix of internal Starlink deployments, commercial customer missions and government contracts.

In recent years, SpaceX has increasingly prioritised launches for its own satellite network over third-party payloads, while continuing to absorb significant costs tied to Starship's development.

'Fake news'

Investors will also be keen to hear CEO Elon Musk's comments on a scheduled conference call about a potential merger between SpaceX and Tesla.

This was after the Wall Street Journal reported last week that executives at his electric-vehicle company had been told to prepare for a separation of its China business ahead of a potential deal.

Musk dismissed the report as "fake news", but he had previously declined to rule out the possibility, citing growing overlap between the companies.

Oil prices drop to three-week low on claims of progress in US-Iran de-escalation

Oil prices fell more than 5% and settled at a three-week low on after comments by Qatari and US officials raised hopes for a diplomatic resolution to the Iran war.

Brent crude futures fell 5.3% to $US79.36 a barrel, its lowest since July 13.

US West Texas Intermediate futures dropped 5.7% to $US75.77 a barrel, also a three-week low.

Here's what various officials said overnight:

US Secretary of State Marco Rubio said there was progress in talks with Iran and Oman about moving more ships through the Strait of Hormuz, but a final agreement was yet to be reached.

US Treasury Secretary Scott Bessent said a deal with Iran to reopen the strait could come as soon as Tuesday or Wednesday (local time).

Qatar's foreign ministry spokesperson Majed al-Ansari said efforts to secure a diplomatic resolution to the war were continuing.

The Emir of Qatar's office said the Emir and US President Donald Trump have discussed ways to reduce escalation and converge viewpoints between the United States and Iran.

Meanwhile, the latest round of US-facilitated talks between Israel and Lebanon began on Tuesday (local time) and will continue through Thursday, a US State Department spokesperson said.

The prospect of a diplomatic solution to the conflict has helped remove some of the geopolitical risk premium in oil prices after the US started bombing Iran again last month, said Simon-Peter Massabni, head of business development at brokerage XS.com.

"If negotiations between the United States and Iran make meaningful progress, the market could continue pricing in a lower probability of supply disruptions, further reducing the geopolitical risk premium embedded in crude prices," he said.

ASX on track to rise again, Wall Street boosted by strong earnings from AI-linked companies

The ASX will start trading in just under half an hour, and is expected to start its day about 0.5% higher.

This will be the fourth day in a row that the Australian market has risen.

It comes after a strong session on US markets, which saw the Dow Jones and S & P 500 climb to new record highs.

Apart from hopes for de-escalation in the Middle East, and US Treasury Secretary Scott Bessent's comments that the Strait of Hormuz could reopen by "tomorrow", the rally on Wall Street was also driven by strong earnings from AI-related companies.

Palantir Technologies soared 29.5% and recorded its biggest daily percentage gain since February 2024, after raising its annual revenue forecast.

Caterpillar, which is seen as a bellwether for the global industrial economy, jumped 5.6% after raising its annual revenue growth forecast, as the buildout of AI data centers has fuelled demand for its power-generation and construction equipment.

Investors have been closely monitoring results from AI-linked companies this earnings season for any signs the massive spending in the space will be justified.

Chip stocks, also seen as beneficiaries of AI-spending, surged, with the Philadelphia Semiconductor index jumping 6.6%, and rebounding for a fourth straight session — after it tumbled 20.6% last month.

Results from corporate earnings this quarter have mostly been strong.

Of the 304 companies in the S & P 500 that have reported second-quarter earnings as of Friday, 85.2% have beaten estimates, versus the long-term average of 67.5%, according to LSEG data.

Questions over AI-linked job losses and offshoring as Qantas confirms it is looking to accelerate the use of AI

Qantas is investigating ways to accelerate its use of AI and is reportedly looking to offshore up to 1,000 jobs to India.

The airline is in early stage discussions with consulting giant Accenture but says "no formal agreement is in place and no decisions have been made".

We invited Professor Greg Bamber, co-author of Up in the Air, onto The Business program last night. His book examines the airlines' relationships with their staff.

He told host Kirsten Aiken why Qantas was likely to experience a major backlash if it went ahead with those offshoring plans.

SpaceX ramped up its spending on AI by more than 2,000pc in one year

SpaceX's AI business, which includes xAI, Grok, social media platform X, and a rapidly expanding data centre operation, has been its biggest area of investment.

The AI division is generating revenue from compute contracts with Anthropic, Alphabet's Google and Reflection AI, though a portion of its recurring revenue has yet to be recognised.

SpaceX sharply increased capital spending on AI, pouring in $US15.83 billion in the second quarter ended June 30, up from $US749 million a year earlier.

That's a 2,013% increase in spending in just one year.

In addition, the company's satellite-internet unit has continued to expand its global subscriber base, aided by launches of additional satellites and a growing range of consumer, enterprise, aviation, maritime and government services.

But average revenue per subscriber slumped 22% from a year earlier as SpaceX entered more international markets and rolled out lower-priced plans even as subscribers doubled to 12 million.

More volatility ahead as SpaceX early investors will soon be able to sell their shares

Despite its strong earnings result, shares of SpaceX are still down 8% since its record-breaking initial public offering in June, which valued the company at about $US1.75 trillion.

The stock could face additional pressure from the expiry of SpaceX's post-IPO lock-up period starting on Thursday (local time).

That's when insiders and early investors will be allowed to sell some of their SpaceX stake, which could unleash even more shares and volatility on the market.

Starlink and SpaceX's broader connectivity operations remain the company's primary financial engine, underpinning CEO Elon Musk's push to build an AI-first business that extends beyond renting compute capacity to developing frontier models, consumer and enterprise software, and, eventually, data centers in space.

But critics have argued that the strategy of using Starlink's profits to bankroll the AI business and Starship launch operations until they can stand on their own is unsustainable.

"That's a tremendous upside surprise today alone, the fact that AI is already monetising itself," said Brian Mulberry, chief market strategist at Zacks Investment Management. "They're not relying on Starlink to fund operations there. I think that's a huge part of the story."

Markets recap: Alan Kohler's finance report

The Australian share market is at its highest level in five months, and is set to rise further in a couple of hours.

If you need a refresher before the ASX opens for trading, I can certainly recommend you watch Alan Kohler's finance report from last night's 7pm News bulletin.

Among other things, Alan explained why diesel and unleaded petrol prices are surging, despite sharp falls in the price of crude oil.

SpaceX revenue jumps in debut quarterly results

SpaceX has reported that its quarterly revenue nearly doubled and operating losses narrowed sharply in its first earnings report since going public, buoyed by strong growth in its Starlink satellite-internet and AI businesses.

But the company's capital expenditures ballooned to more than $US18 billion ($25.5b) from $US2.83 billion ($4b) a year earlier, and SpaceX finance boss Bret Johnsen said he expected capital spending would be similar for the next couple of quarters.

SpaceX shares fell 7.5% in after-hours trading. The stock rose 9.4% in regular trade on Wall Street on Tuesday (US time) ahead of the publication of its results.

The company, led by Elon Musk, reported April-June revenue of $US7.8 billion ($11.1b), compared with $US4.1 billion ($5.8b) a year earlier, beating expectations, according to LSEG data.

Starlink revenue, which accounted for over half of total revenue, rose 66%, and revenue from SpaceX's AI business — which Musk has pitched as the company's future growth driver — surged about 250%.

"We're building AI compute capacity at scale faster than anyone else, we believe, and we're significantly improving our AI models," Musk said in a post-earnings call.

AI operating losses narrowed, as did total operating losses, to $US143 million from $US970 million.

Operating income at its Starlink division surged 79%.

Billion-dollar property collapse highlights private credit danger

Liquidators will attempt to unravel the private credit danger.