Oil Steadies, Treasuries Dip as Iran Stresses Ease: Markets Wrap

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(Bloomberg) — Global markets calmed on Monday as traders speculated that diplomatic efforts will help prevent the conflict between Iran and Israel from escalating.

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European stocks ticked higher and US equities signaled a rebound on Wall Street after Friday’s 1.5% selloff in the S&P 500. Treasuries slipped along with the dollar. Brent crude dropped below $90 a barrel. Gold advanced to $2,347 an ounce.

While nerves are still running high given the possibility that Israel might retaliate after Iran fired a barrage of missiles and drones over the weekend, investors took some comfort after the Iranian mission to the United Nations said the issue “can be deemed concluded.” The US and other nations also called for restraint in an effort to head off a full-blown regional war.

“It’s right to price more geopolitical risk premia into assets, but at the end of the day equity markets are still only about 2% off all time highs,” said Timothy Graf, head of EMEA macro strategy at State Street. “This was a well telegraphed geopolitical development. A lot of the bad news is in the price already.”

Treasuries’ Haven Role Faces Pressure From Oil Price Impact

Markets have been rattled by the threat of a strike and counter-strike cycle in the Middle East, which could push drive energy prices higher at a time when policymakers are still struggling to bring down inflation. But for now, traders said the situation seems contained.

“So far there doesn’t seem to be any danger of inflation expectations coming unanchored,” said Graf. “The inflation we are seeing from commodity prices is all supply-side driven.”

While unprecedented, the assault caused minimal damage and no fatalities as almost all the projectiles were intercepted. The American, British and French air forces shot down some of them in coordination with the Israelis.

Europe’s version of the VIX Index sank 7%, an indication that worries are subsiding. Israel’s shekel rebounded after a bout of selling, rising as much as 0.9% on Monday.

Earnings season continues today with Goldman Sachs Group Inc. and Charles Schwab Corp. due to report. With investor positioning looking “very stretched” and indexes not far from all-time highs, it’s unlikely that an upbeat earnings season can keep powering stocks higher, according to JPMorgan Chase & Co. strategists.

“We need to see clear earnings acceleration in order to justify current equity valuations, which we fear might not come through,” Mislav Matejka wrote in a note.

Elsewhere, aluminum surged by a record on the London Metal Exchange as traders responded to new US and UK sanctions that banned deliveries of Russian supplies produced after midnight on Friday.

The restrictions on key industrial metals — aimed at curbing President Vladimir Putin’s ability to fund his war machine — are unlikely to stop Russian sales but inject significant uncertainty into commodities markets that have already been reshaped in the aftermath of Russia’s invasion of Ukraine.

Key events this week:

  • Eurozone industrial production, Monday

  • US retail sales, empire manufacturing, business inventories, Monday

  • Federal income taxes due in the US, Monday

  • IMF and World Bank spring meetings start in Washington, Monday. The main ministerial meetings will be held April 17-19

  • Canada CPI, Tuesday

  • China property prices, retail sales, industrial production, GDP, Tuesday

  • UK jobless claims, unemployment, Tuesday

  • New Zealand home sales, CPI, Wednesday

  • Eurozone CPI, Wednesday

  • UK CPI, Wednesday

  • Australia unemployment, Thursday

  • Japan CPI, Friday

  • India’s elections begin, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.3% as of 10:33 a.m. London time

  • S&P 500 futures rose 0.4%

  • Nasdaq 100 futures rose 0.5%

  • Futures on the Dow Jones Industrial Average rose 0.2%

  • The MSCI Asia Pacific Index fell 0.9%

  • The MSCI Emerging Markets Index fell 0.8%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro rose 0.1% to $1.0658

  • The Japanese yen fell 0.4% to 153.87 per dollar

  • The offshore yuan rose 0.2% to 7.2556 per dollar

  • The British pound rose 0.3% to $1.2486

Cryptocurrencies

  • Bitcoin rose 4.5% to $66,717.4

  • Ether rose 6% to $3,252.61

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.55%

  • Germany’s 10-year yield advanced four basis points to 2.40%

  • Britain’s 10-year yield advanced six basis points to 4.19%

Commodities

  • Brent crude fell 1.2% to $89.35 a barrel

  • Spot gold rose 0.2% to $2,347.96 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu and Allegra Catelli.

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