Oil slumped and equities gained as US President Donald Trump expressed confidence that a fragile truce between Israel and Iran would hold, reinforcing investors’ optimism for a lasting resolution to the conflict.
Brent crude slid as much as 5.6% and erased all gains accumulated since the onset of Israel’s attacks on Iranian nuclear sites, after Trump announced that the two warring nations agreed to a ceasefire. The benchmark later trimmed losses to trade above $69 a barrel as Israel reported a missile launch from Iran and instructed its military to respond.
Iran denied firing the missiles following the truce, according to state media, while Trump implored Israel in a social media post not to follow through, calling it a “major violation.” Trump subsequently posted that “Israel is not going to attack Iran.”
S&P 500 futures rose 0.7%, signaling a second day of gains for the US benchmark. European stocks and Asian stocks also advanced. The dollar headed for its biggest drop since the outbreak of the conflict. The yield on 10-year Treasuries dropped two basis points to 4.33% as investors’ awaited Federal Reserve Chair Jerome Powell’s testimony before lawmakers.
The rapid-fire sequence of events followed a turbulent stretch in financial markets, which have been roiled for nearly two weeks by fears of an escalating conflict. Volatility was particularly high in oil, as concerns over supply and shipping disruptions had pushed Brent crude to nearly $80 a barrel.
“If the ceasefire holds – and there is no guarantee that it will – it will undoubtedly be greeted positively by markets as it will at the margin reduce uncertainty,” said Daniel Murray, chief executive officer of EFG Asset Management in Switzerland. Lower oil prices will reduce inflationary pressure and “also help support consumption trends and hence growth overall.”
The greenback slipped 0.5% against a basket of currencies as demand to hedge against higher oil prices receded.
“The US dollar was one of the key beneficiaries of the hostilities so it is now rolling over,” said Sean Callow, a senior analyst at InTouch Capital Markets. “Investors have been very keen to draw a line under the Israel-Iran conflict, choosing to leave aside any concerns over the path Iran might choose beyond the very short term.”
Investors are now turning their attention back to a series of conflicting signals coming from the world’s largest economy. Powell’s testimony at the House Financial Services Committee will also give markets fresh clues on the direction of monetary policy.
“We’re going to go back to the bigger picture, and that is to talk about tariffs and growth,” Mislav Matejka, head of global equity strategy at JPMorgan Chase & Co., told Bloomberg TV. “To believe that tariffs are fully digested and that inflation pickup will not happen whatsoever, i think that is premature.”
Corporate Highlights:
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Tesla Inc. rose 2.6% in premarket trading, set to extend gains after the automaker rolled out its long-promised driverless taxi services to a handful of riders.
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Spain’s government is set to impose additional conditions on BBVA SA’s planned takeover of Banco Sabadell SA, La Vanguardia reported.
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Alphabet Inc.’s Google is set to face more scrutiny from the UK’s antitrust watchdog over its online search and advertising business.
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Nvidia Corp. Chief Executive Officer Jensen Huang has started selling the chipmaker’s stock, his first transactions under a plan that allows him to offload up to $865 million worth by year’s end.
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Spanish drugmaker Grifols SA paid a higher price to buy blood plasma from an entity linked to its controlling family than from third-party suppliers, according to a regulator’s findings submitted in a court case.
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.7% as of 7:33 a.m. New York time
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Nasdaq 100 futures rose 1%
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Futures on the Dow Jones Industrial Average rose 0.6%
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The Stoxx Europe 600 rose 1.2%
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The MSCI World Index rose 0.5%
Currencies
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The Bloomberg Dollar Spot Index fell 0.5%
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The euro rose 0.3% to $1.1611
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The British pound rose 0.7% to $1.3623
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The Japanese yen rose 0.8% to 144.95 per dollar
Cryptocurrencies
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Bitcoin rose 1.5% to $105,324.72
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Ether rose 2.9% to $2,415.85
Bonds
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The yield on 10-year Treasuries declined two basis points to 4.33%
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Germany’s 10-year yield advanced five basis points to 2.55%
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Britain’s 10-year yield was little changed at 4.49%
Commodities
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West Texas Intermediate crude fell 2.7% to $66.64 a barrel
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Spot gold fell 1.4% to $3,322.87 an ounce
. Read more on Markets by NDTV Profit.