Headlines:
Iran is ready to abandon its nuclear program if the US makes a satisfactory offerIs this a hint that the US-Iran conflict might stretch on for much longer?ECB’s de Guindos: Baseline scenario is that US-Iran will be a short conflictECB policymaker Villeroy: I do not see reason today why we should raise interest ratesEurozone January retail sales -0.1% vs +0.3% m/m expectedGermany February construction PMI 43.7 vs 44.7 priorUK February construction PMI 44.5 vs 47.0 expectedUS February Challenger layoffs 48.307k vs 108.435k priorA friendly reminder that we do have the US non-farm payrolls tomorrow
Markets:
WTI crude oil up 1.5% to $77.20, Brent crude oil up 1.3% to $83.69S&P 500 futures down 0.2% but recover from 0.5% losses earlierCAD leads, USD push and pull but firmer overall nowGold up 0.5% to $5,163, Silver up 0.8% to $84.0810-year Treasury yields up 5 bps to 4.13%Bitcoin down 0.6% to $72,919
The session started with markets throwing caution to the wind, with relative unease still due to the Middle East conflict.
Then, the mood music improved on a headline by Sky News Arabia that Iran might look to abandon its nuclear program should the US make a good enough offer. That saw oil prices pull back a little with risk trades moving up and the dollar dropping. However, the reaction would prove to be short-lived.
The fact remains that the US and Iran are still so far apart in terms of trying to negotiate a compromise any deal. It’s the whole reason why this war started in the first place, that being talks have been going nowhere. And even in the latest talks last week before the conflict started, the gap between both sides look too far to bridge and Trump has refused to wait around.
Missiles have launched and military action is in motion. It is almost implausible to imagine we go back to the negotiating table in all of this. Well, not at least in the immediate term.
As markets reread the headline and digest the situation, the initial kneejerk reaction is seen fading a bit now. We’re not quite back to the nervous mood seen in Asia but caution is back up in the air again.
Oil prices were scaling up earlier in the day with WTI crude oil around $77.20 before falling off to $75.00 on the headline. Now, we’re seeing a rebound back to above $77 again as markets settle back into the thick of things.
Likewise, US futures also bounced with S&P 500 futures clearing losses of 0.5% to turn positive. However, that only lasted for a good hour or so and futures are now down 0.2% on the day.
The reaction in major currencies saw the dollar give up gains but again, also just momentarily. EUR/USD moved up from 1.1590 to 1.1640 before falling back to 1.1610 now. USD/JPY dropped from 157.20 to 156.90 but has now jumped even higher to 157.47 on the day.
In other markets, precious metals saw plenty of pushing and pulling. Silver was down by nearly 4% at the tail end of Asia trading to $80.60 but has now recovered to be up 0.8% to $84.08. Gold was flattish for the most part but is now sitting higher by 0.5% to $5,163.
Looking to bonds, 10-year Treasuries continue to fall off with yields now up 5 bps to 4.13%. As oil prices stay elevated, inflation fears continue to outweigh safety flows when it comes to the bond market this week.
This article was written by Justin Low at investinglive.com.