Devon Funds Morning Note - 02 October 2026

Friday 2nd October 2026

Iran’s oil exports dry up

Global

US equities edged higher overnight, with the S&P 500 up 0.2%, the Nasdaq flat and the Russell 2000 up 0.3%. AI remained the market's main theme, and semiconductors rose another 1.6%. Lower bond yields helped the gains spread more widely, with software up 1.6% and cyclicals up 0.5%. Energy was the best-performing sector, up 1.9%, as oil jumped around 4%.

Industrial metals fell again. Aluminium, copper, zinc and nickel each dropped more than 1%. Gold miners also lost more than 1% even though gold rose 0.5%. ETF flows were most likely behind that gap, and the NYSE Gold Index is now down about 18% from its recent highs.

US Treasury yields fell despite the rise in oil prices. The 2-year yield dropped 11 basis points to 4.78%, and the 10-year eased 5 basis points to 5.24%. The move appeared to follow comments from Fed Vice Chair Philip Jefferson, a voting member, who said it may take more time to judge whether further hikes are needed to bring inflation down. Markets still expect the Fed to hold rates in late October and raise them in December. Attention now turns to tonight's September payrolls report, with consensus expecting 90,000 jobs and an unemployment rate of 4.1%.

Iran may be softening its position as economic pressure builds. According to diplomats familiar with the discussions, Foreign Minister Abbas Araghchi suggested in private meetings at the UN General Assembly that Iran could restore inspectors' access to its bombed nuclear facilities in return for sanctions relief. He reportedly raised the idea with European and Middle Eastern diplomats. They see it as a sign of how much economic pain Iran is under: inflation is running at almost 90% a year, and the rial has fallen about 30% against the US dollar as sanctions take hold.

Iran's oil revenue is also drying up. Bloomberg reports that Iran loaded zero crude onto tankers in September because of the US naval blockade, down from about 250,000 barrels a day in August. It was the first month without any loadings since the war began. This fits Treasury Secretary Bessent's comments earlier this week that Iran was close to making its final oil deliveries to China. Together, the reports suggest Iran has a growing reason to reach a deal sooner rather than later. There is no sign yet that Washington is willing to ease its position.

New Zealand

Back home, the NZX 50 slipped 0.2% to start the new month, recovering from an intraday fall of almost 1.0%. Main detractors saw Infratil fall 1.5%, Meridian Energy lost 1.7%, and Skellerup Holdings down 2.6%. Fisher & Paykel (+1.0%), Fonterra Co-operative (+1.3%), and the Warehouse Group (+2.4%) were amongst those that gained.

Market news saw Heartland Group Holdings shareholders vote strongly in favour of the proposed $620 million merger of Heartland Bank and TSB Bank. However, the deal still needs several regulatory approvals before it can be completed. The deal has faced strong community-led opposition, including a failed attempt to block it with an injunction. Shareholders also approved the issue of 200 million Heartland shares to TSB's owner, the Toi Foundation, as part of the purchase price, and voted to appoint TSB chair Mark Darrow to the Heartland board.

The Commerce Commission has published a statement of preliminary issues on a proposed joint venture between 2degrees and One NZ. The JV would own and operate the two companies' radio access network (RAN) assets, the mobile towers and equipment that connect customers to their networks. The Commission is due to decide whether to clear the JV by 23 November 2026, although that date could be extended.

Lastly, New Zealand's housing market is heading into the spring and summer selling season with a large overhang of unsold homes. Realestate.co.nz received 9,466 new listings in September, up 13.7% on August and 0.8% on a year earlier. Total stock for sale rose 10.7% from a year earlier to 34,001 properties, the highest for any September since 2014, which suggests homes are taking longer to sell. The national average asking price was broadly flat at $845,142, down 0.2% from a year earlier, but regional results varied widely.

Australia

The ASX 200 started October falling sharply (-2.0%), giving back all of Wednesday's relief rally and closing at its lowest level since mid-June. The sell-off followed another surge in US bond yields to their highest levels in more than 20 years, with the 10-year reaching 5.3% and the 30-year 5.65%. A late sell-off on Wall Street to end a weak September quarter added to the pressure. All 11 sectors fell, and trading volumes were light to start the month. Australian bond yields rose 5–8 basis points across the curve, and the Australian dollar stayed below US$0.70 at around US$0.6953.

Energy was the worst sector, down 3.0%, as oil fell on reports that Iran had received a US response to its ceasefire proposal. Karoon (-4.1%), Woodside (-3.1%) and Santos (-2.7%) led the declines, and Yancoal fell 7.0% after completing its US$1.85 billion purchase of an 80% stake in the Kestrel coking coal mine.

Materials lost 1.9%. Liontown dropped 15.1% after analysts cut its price target to $0.95 and lowered FY27–28 earnings estimates by up to 48.6% following its Kathleen Valley update. Lynas Rare Earths fell 8.6% after agreeing to buy Meteoric Resources in a $968 million all-scrip deal, which sent Meteoric up 47.1%. IperionX lost 8.0% on a broker downgrade, and Rio Tinto fell 2.4%, even as its Bell Bay smelter received a $200 million rescue package from the federal and Tasmanian governments.

Defensive sectors offered little protection. Real estate fell 2.5%, reversing Wednesday's gains, and consumer staples lost 2.6% as Woolworths (-2.9%) and Coles (-2.6%) fell sharply. Health care declined 2.5%, with CSL down 3.3%. Cochlear dropped 6.6% after a downgrade to Underweight, as analysts cut FY27–29 earnings estimates by 3–8% on slower implant growth and flagged a fully implantable cochlear implant as a potential disruptive risk. Financials lost 2.1%, with the banks down 2.2%. Suncorp fell 7.4% after denying it was in takeover talks with Tokio Marine, following an ASX price and volume query.

Technology held up best but still fell 0.6%. Data#3 was a notable exception, jumping 13.7% after its first-half FY27 trading update guided about 30% above market expectations.

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