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Treasuries, Oil Stabilize as Iran Stresses Ease: Markets Wrap

In Business
April 15, 2024

(Bloomberg) — Global markets showed signs of stability, as traders awaited further developments in the Middle East following Iran’s unprecedented attack on Israel over the weekend.

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The dollar was little changed against its Group-of-10 peers, while Treasuries edged lower after yields slipped in the previous session. Oil prices eased on speculation that the conflict would remain contained after Iran said “the matter can be deemed concluded,” and President Joe Biden reportedly told Israeli Prime Minister Benjamin Netanyahu that the US won’t support an Israeli counterattack.

“The muted market response likely stems from the highly intricate sentiment in the market at this stage,” said Hebe Chen, an analyst at IG Markets. “Market participants are certainly not giving up hope that the past weekend’s events were just a one-off occurrence, while holding their breath for what could happen next,” she added, referring to the attacks.

Shares in Asia slipped to a six-week low, tracking Friday’s drop in US stocks, on escalating geopolitical risks, disappointing bank earnings and the prospect of the Federal Reserve keeping interest rates higher for longer. Futures for US equities edged higher in Asia after the S&P 500 suffered its worst session since January on Friday amid a flight to safety.

Chinese stocks were an outlier, as renewed regulatory support from Beijing. The State Council on Friday pledged to tighten stock listing criteria, crack down on illegal share sales and strengthen the supervision of dividend payouts.

Elsewhere, developer China Vanke Co. said it’s making plans to resolve liquidity pressure and short-term operational difficulties as China’s top leaders have grown increasingly alarmed about the country’s protracted real estate crisis and its effect on the sluggish economy.

In other currencies, Malaysia’s central bank reaffirmed it’s ready to support the ringgit, which is hovering close to the lowest level since 1998. Meantime, Japanese Finance Minister Shunichi Suzuki said officials are watching the yen closely as it extended last week’s weakness against the dollar.

Aluminum and nickel surged following new US and UK sanctions that banned deliveries of any Russian supplies after midnight on Friday. Gold aslo gained.

With investors already rattled by sticky inflation and the prospect of higher-for-longer interest rates, the escalation of the Middle East crisis may inject fresh volatility into markets. As the conflict widens, many say oil could surpass $100 a barrel and expect a flight to Treasuries, gold and the dollar, along with further stock-market losses.

Bitcoin rallied after it sank almost 9% in the wake of the attacks. Stock markets in Saudi Arabia and Qatar posted modest losses under thin trading volumes on Sunday. Israel’s equity benchmark fluctuated between gains and losses at least nine times before closing with a small gain.

As Wall Street’s earnings season kicked off, big banks’ results offered the latest window into how the US economy is faring amid an interest-rate trajectory muddied by persistent inflation.

JPMorgan Chase & Co. and Wells Fargo & Co. both reported net interest income — the earnings they generate from lending — that missed estimates amid increasing funding costs. Citigroup Inc.’s profit topped analysts’ estimates as corporations tapped markets for financing and consumers leaned on credit cards — signs that a prolonged period of elevated interest rates will benefit big banks.

“Many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces,” JPMorgan’s Chief Executive Officer Jamie Dimon said. He cited the wars, growing geopolitical tensions, persistent inflationary pressures and the effects of quantitative tightening.

Traders will soon shift to looming economic data as they refine bets on central bank easing cycles, as well as the International Monetary Fund and World Bank spring meetings in Washington. This week, Chinese growth data and Japan, Eurozone and UK inflation readings are due.

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

  • S&P 500 futures rose 0.2% as of 12:32 p.m. Tokyo time

  • Nikkei 225 futures (OSE) fell 1.1%

  • Japan’s Topix fell 0.5%

  • Australia’s S&P/ASX 200 fell 0.4%

  • Hong Kong’s Hang Seng fell 0.8%

  • The Shanghai Composite rose 1.2%

  • Euro Stoxx 50 futures were little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0650

  • The Japanese yen fell 0.3% to 153.70 per dollar

  • The offshore yuan rose 0.1% to 7.2589 per dollar

  • The Australian dollar rose 0.2% to $0.6483

Cryptocurrencies

  • Bitcoin rose 2.2% to $65,300.21

  • Ether rose 2.6% to $3,149.39

Bonds

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

  • Japan’s 10-year yield was unchanged at 0.845%

  • Australia’s 10-year yield declined two basis points to 4.25%

Commodities

  • West Texas Intermediate crude fell 0.4% to $85.36 a barrel

  • Spot gold rose 0.6% to $2,357.91 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Yongchang Chin.

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