It’s Day 27 of the war: stocks and bonds fell globally as ceasefire optimism fades given mixed messages on progress toward ending the war in Iran and growing uncertainty over Iran’s willingness to engage in talks about a ceasefire in the Middle East sent oil prices higher. Futures gapped lower just after 5am ET, when Axios reported that the Pentagon is developing military options for a “final blow” in Iran that could include ground troops. Trump urged Iran “to get serious” before it was too late but Tehran is steadfast saying no negotiations are occurring and both side rejecting each other’s deal demands as the fighting continues & more military assets arriving. As of 8:00am ET, S&P 500 futures dropped 0.9%, at session lows, with about 48 hours before a US delay in strikes on Iranian energy infrastructure expires. Nasdaq futures slumped more than 1%.In premarket trading, Mag7 names were down with all sectors lower ex-Energy. Brent resumed its advance, rising 3.8% to above $106 a barrel; Oil is on track for its biggest monthly jump in more than three decades, as the Trump administration examines potential consequences if prices spike to $200 a barrel. The move rekindled inflation fears and pushed yields higher as money markets priced in tighter monetary policy. Two-year Treasury yields rose four basis points to 3.93% as the yield curve bear flattened with yields +4 – 6bp; the 10Y yield was back up to 4.39%, pushing the USD also higher. Gold slipped below $4,450 an ounce. Today’s macro data focus is on initial / continuing claims
In premarket trading, Mag 7 stocks are all lower (Alphabet -1%, Amazon -1%, Apple -0.2%, Nvidia -1.2%, Meta -1.3%, Microsoft -0.4%, Tesla -1%)
- US mining stocks fell and energy stocks rose as attacks in the Middle East continued and US President Donald Trump warned Iran to get serious about discussions “before it is too late.”
- Memory-chip stocks fall in reaction to a new compression technique proposed by Google researchers that could reduce the amount of memory needed for AI workloads. Micron (MU) falls 2% while Sandisk (SNDK) declines 3%.
- Equitable Holdings Inc. (EQH) gains 3% and Corebridge Financial Inc. (CRBG) rises 1.7% as the US insurers are set to merge in an all-stock deal valuing that combined business at $22 billion.
- Kodiak Sciences (KOD) climbs 43% after the drug developer gave efficacy data from a late-stage trial of its experimental drug for diabetic retinopathy — a complication of diabetes that affects the eyes.
- MillerKnoll (MLKN) drops 18% after the office furniture designer’s earnings forecast for the fourth quarter missed the average analyst estimate.
- Navan (NAVN) rises 18% after the business travel platform reported fourth-quarter results that beat expectations and gave an outlook analysts see as both positive and conservative.
- Olaplex (OLPX) rose more than 50% after Henkel agreed to buy the hair-care brand in a $1.4 billion deal.
- Precigen (PGEN) jumps 15% after the biopharmaceutical company said first-quarter revenue is expected to exceed $18 million, driven by sales of its recurrent respiratory papillomatosis treatment, Papzimeos.
In other corporate news, Blackstone is said to be close to a deal to buy Rowan Digital Infrastructure, which may value the major U.S. data center developer at more than $10 billion. Novo Nordisk’s Chairman is set for an earful at the AGM after a boardroom coup, with investors pointing to recent missteps.
With markets already on edge over Iran’s unwillingness to negotiate ceasefire terms, the mood deteriorated overnight after an Axios report that the Pentagon is developing military options for a “final blow” in Iran that could include the use of ground forces and a massive bombing campaign. Trump claimed Iran was desperate for a deal to end hostilities and the White House insisted peace talks are ongoing, even as Tehran publicly rejected US overtures and issued fresh conditions of its own to end the conflict. Those included sovereign control over the Strait of Hormuz, and drafting laws to introduce tolls for safe passage.
“If Iran were to signal willingness to negotiate and an end to the closure of the Strait of Hormuz became more likely, equity markets may quickly move back to previous highs,” said Wolf von Rotberg, strategist at Bank J Safra Sarasin. “Yet Iran has so far declined all offers to talk as time is on their side.”
In AI news, memory stocks are under pressure on concerns over demand after Google researchers touted its new TurboQuant technology, a new compression technique. Bulls suggest the improved efficiency may actually increase demand, but related stocks at risk of profit taking after exponential moves in related stocks. Accenture launched Cyber.AI powered by Claude, Anthropic’s AI model.
Private credit is again in focus after Jefferies’ results missed Wall Street estimates, dragged down by losses on wayward credit bets, an Ares private credit fund posted its steepest monthly loss on record and ex-Goldman CEO Lloyd Blankfein warned of “fire” risk in private markets. In contrast, executives from Apollo, Blackstone and Blue Owl said they don’t see evidence of rising systemic risks or defaults, which is to be expected since they all run… private credit funds.
BlackRock Inc. President Rob Kapito said investors may be underestimating the risks stemming from the war, which are likely to weigh on economic growth and drive inflation higher even if the conflict ends soon.
“What if this disruption is a week, six months, a year — what is it going to mean for the companies that I own?” Kapito said. “My biggest concern is that people aren’t looking at this – they’re just making the assumption” for an optimistic outcome.
JPMorgan expects around $65 billion of equity buying and bond selling due to March-end rebalancing; Goldman sees a more modest $13 billion. Elsewhere, global investors are on track to withdraw a record amount from Asian EM equities excluding China, as surging oil prices due to the Middle East conflict cloud the region’s outlook.
The Fed’s Stephen Miran said he moved up his projection for where interest rates should end the year by half a percentage point in response to disappointing inflation data, not due to oil and Iran. A plethora of Fed speakers are on deck later today.
In politics, FHFA’s Pulte sent letters to the DOJ encouraging prosecutors to open new fraud investigations into New York Attorney General Letitia James related to real estate. G-7 energy, finance ministers and monetary policy makers will meet on Monday to discuss the situation in the Middle East. Officials in Berlin have started mapping vulnerabilities in US supply chains to identify points where Germany and its European Union partners could apply pressure.
European stocks slumped more than 1.2% as higher energy prices dampen sentiment. Stoxx 600 falls 1.2% to 580.54 with mining and technology stocks leading declines. The biggest outperformers were chemicals and personal care shares. Here are the biggest movers Thursday:
- Next shares rally as much as 6.9%, the most in five months, after the clothing retailer posted annual profits that were slightly ahead of the upgraded guidance outlined in January, having boosted its outlook five times throughout the year
- Comet rises as much as 4.8% after BNP Paribas double-upgrades the semiconductor equipment components supplier to outperform from underperform, citing expectations the company will benefit from a multi-year memory capex super-cycle
- THG shares rise as much as 8.8%, among the top gainers in the FTSE 250 Index on Thursday morning, after the online retailer reported 2025 results and said it’s had a strong start to the new year, which support revenue and adjusted Ebitda expectations
- Pollen Street rises as much as 8.4%, the most since Jan. 2025, after the alternative asset manager delivered results which Panmure Liberum says came in ahead of consensus expectations
- The Stoxx 600 basic resources index is the worst-performing sector in Europe, falling as much as 3.6% on Thursday
- Boliden drops as much as 19%, the most since January 2008, after providing an update on the abnormally high seismic activity that has impacted production at its key Garpenberg mine
- Edenred shares drop as much as 16%, slumping to a 2016-low, after the Italian Competition Authority launched an investigation into its Italian subsidiary over possible abuse of its dominant market position in the meal voucher market
- H&M slips as much as 6.6%, the most since September 2024, after the Swedish fast-fashion retail group reported weaker-than-expected current trading which analysts said overshadowed margin strength in the first quarter
- Currys shares drop as much as 11%, the most in over two years, after announcing the departure of Chief Executive Alex Baldock
- 3i Group shares fall as much as 3.3% after sales and margin at Action, its largest portfolio company, missed analyst estimates
- CSG shares fall as much as 6.7% after the recently-listed defense firm posted weaker-than-expected earnings in its Ammo+ small caliber ammunition division, though it saw a better performance in military vehicles and weapons
Asian stocks fell after two consecutive days of gains as conflicting signals from the US and Iran about their ceasefire talks turned investors cautious. The MSCI Asia Pacific Index fell as much as 1.4% before paring some declines. Shares of South Korean chipmaking giants Samsung and SK Hynix were the biggest drags on the benchmark, slumping on concerns over demand after Google researchers touted a new compression technique that can reduce memory size for large language models and vector search engines. Equity benchmarks in Hong Kong and Indonesia were among the top losers in Asia alongside the Kospi, while markets in India were shut for a holiday. Strategists at Goldman Sachs downgraded the South Asian nation’s stocks to marketweight from overweight, citing higher‑for‑longer energy prices from the war.
In FX, markets are contained compared to stocks and bonds with the Bloomberg Dollar Spot Index barely up 0.1% as the greenback posts a mixed performance versus peers.
In commodities, Brent crude is up over 3% and around the $106 per barrel mark with the US and Iran providing conflicting comments on efforts to end the war. More recently, an Axios report noted that the Pentagon is developing military options for a “final blow” in Iran.
In rates, higher energy prices are again dragging bonds lower with US yields up 4-5bps across the curve. Norwegian bonds saw further losses after the Norges Bank held rates steady but pointed towards a potential rate hike.
Spot gold and silver are on the back foot, showing respective losses of 1.5% and 4%. Bitcoin is down 1.9%.
US economic data scheduled includes weekly initial jobless claims (8:30am) and March Kansas City Fed manufacturing activity (11am). Fed speaker slate includes Cook (4pm), Miran (6:30pm), Jefferson (7pm) and Barr (7:10pm)
Market Snapshot
- S&P 500 mini -0.8%
- Nasdaq 100 mini -1%
- Russell 2000 mini -1.2%
- Stoxx Europe 600 -1.3%
- DAX -1.6%
- CAC 40 -1.1%
- 10-year Treasury yield +4 basis points at 4.38%
- VIX +2.2 points at 27.51
- Bloomberg Dollar Index little changed at 1212.32
- euro little changed at $1.1557
- WTI crude +3.4% at $93.38/barrel
Top Overnight News
- The Pentagon is developing military options for a “final blow” in Iran that could include the use of ground forces and a massive bombing campaign: Axios
- President Trump has told associates in recent days that he wants to avoid a protracted war in Iran and that he hopes to bring the conflict to an end in the coming weeks. The president has privately informed advisers he thinks the conflict is in its final stages, urging them to stick to the four-to-six-week timeline he has outlined publicly, according to people familiar with the matter. WSJ
- Israeli officials say a US-Iran deal remains unlikely, but fear President Donald Trump could still declare a temporary ceasefire as talks continue. Jerusalem Post
- Trump administration officials are examining what a potential spike in oil prices as high as $200 a barrel would mean for the economy, according to people familiar with the matter, a sign senior officials are studying the possible fallout from extreme scenarios for the Iran war. BBG
- On the stage and sidelines of a global energy conference in Houston, CEOs painted a much bleaker picture: Financial markets aren’t accurately reflecting the gravity of the crisis, the war is crippling the world’s fuel supplies, and the industry’s Middle East operations are at risk, they said. WSJ
- Hong Kong is weighing “big bang” tax cuts that may allow many asset managers to earn their performance fees free of all levies. FT
- Norway’s central bank said it’ll probably raise its benchmark rate at one of its forthcoming meetings. Officials left it at 4% today, as expected. BBG
- Germany has plans for the EU to squeeze US tech, drug supplies and manufacturers in its next dispute with Trump. The goal is to create a consensus among bloc members on how to best use their leverage. BBG
- Gulf and European allies are closely watching and growing concerned about the lack of momentum towards negotiations to end the conflict or even put a ceasefire into place. CNN
- An Ares-managed $23 billion private credit fund posted its steepest monthly loss on record in February. BBG
- Global investors are on track to withdraw a record amount from Asian EM equities excluding China, as surging oil prices due to the Middle East conflict cloud the region’s outlook. BBG
- White House confirms that US President Trump is to hold a cabinet meeting is to be held from 10:00EDT/14:00GMT on Thursday.
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded cautiously as the geopolitical situation in the Middle East remained fluid, with mixed messages from the US and Iran about talks, while strikes persisted overnight against Iran and its regional neighbours. ASX 200 closed slightly lower with miners, tech and materials front-running declines, but with downside cushioned by gains in energy, defensives and financials, while price action was contained by a lack of data or fresh major catalysts. Nikkei 225 retreated as the rebound in oil stoked inflationary and growth concerns, given Japan’s large dependency on Middle East oil, despite the government releasing emergency oil reserves, as planned. Hang Seng and Shanghai Comp were pressured amid a deluge of earnings releases and with developer debt concerns stoked as China Vanke seeks another bond repayment delay, whilst it works on a restructuring plan.
Top Asian News
- Japan’s provisional budget is seen totalling around JPY 8.6tln, according to NHK.
European bourses (STOXX 600 -1.1%) have gotten off to a softer start to Thursday’s session. The DAX 40 underperforms, hindered by poor Porsche SE (-2.6%) earnings, while the SMI outperforms with only mild losses, as Kuehne+Nagel, along with the broader shipping sector, is supported by Hapag-Lloyd earnings. European sectors are entirely in the red, with Basic Resources, yet again, sitting at the bottom of the pile as metals prices continue to fall. Technology also prints decent losses, following news stateside by Google that its new TurboQuant tech can reduce the amount of memory needed for AI workloads, which is weighing on computer memory and storage makers (ASML -3.8%).
Top European News
- Spanish GDP Growth Rate QoQ Final (Q4) Q/Q 0.8% vs. Exp. 0.8% (Prev. 0.6%).
- Spanish GDP Growth Rate YoY Final (Q4) Y/Y 2.7% vs. Exp. 2.6% (Prev. 2.7%).
- German GfK Consumer Confidence (Apr) -28.0 vs. Exp. -26.5 (Prev. -24.7, Low. -32.2, High. -25.6).
- Italian Business Confidence (Mar) 88.8 (Prev. 88.5).
- Italian Consumer Confidence (Mar) 92.6 (Prev. 97.4).
Trade/Tariffs
- Germany reportedly drafts a plan to hit US tech, drug supplies and companies, Bloomberg reported citing sources; officials are mapping vulnerabilities in US supply chains to apply pressure on the US.
- China’s Foreign Ministry, on Trump’s China visit announcement for May 14-15th, said the two sides have maintained communication.
- China Commerce Ministry will impose an additional 55% tariff on beef imports from Australia after quota threshold reached.
- EU’s Dombrovskis said we have received assurances from the US that they intend to honour the trade deal.
- US President Trump said Supreme Court ruling on tariffs will cost the US hundreds of millions.
FX
- DXY is essentially flat and trades within a narrow 99.56-99.75 range, with price action taking a breather after a string of ceasefire related volatility. Recent reports surrounding the Middle East situation suggests that US President Trump told aides he wants a speedy end to the Iran war and wants to wrap up the conflict in the coming weeks, via WSJ. Elsewhere, Israeli Media reported that US President Trump may announce a ceasefire with Iran by next Saturday. Jobless claims and a slew of Fed speak is due throughout the day.
- G10s are incrementally lower against the USD (ex-Antipodeans). Ultimately, subdued price action as markets await updates related to concrete progress on the ceasefire plan, or the risk of another bout of escalation measures. Most recently, Axios reported that Trump is preparing for a massive “final blow” against Iran. Antipodeans are at the bottom of the G10 pile this morning, with the Kiwi underperforming – pressure which follows the broader downbeat risk-tone. EUR/USD trades within a very thin 1.1547-1.1572 range, and ultimately little moved to ECB’s Nagel and de Guindos. Elsewhere, Cable is incrementally lower, as traders await commentary from BoE’s Breeden, Taylor and Greene. Focus will be on the former, given Taylor spoke last week (remained dovish), whilst Greene spoke on Wednesday.
- NOK is net-unchanged in the aftermath of the Norges Bank policy announcement, where the Bank kept rates steady at 4% (as expected). There was some volatility at the time, with EUR/NOK moving higher as traders unwound outside bets of a hike. That move since entirely pared. Decision aside, focus was on the MPR and accompanying commentary was hawkish, with the Bank noting that “it will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings”. This was also reflected by the updated MPR, whereby the end-2026 rate is now seen at 4.35% (prev. 3.71%); 2027 was revised higher to 3.98% (prev. 3.31%), and the “terminal rate” was raised to 3.54% (prev. 3.20%).
Fixed Income
- Once again, another session dictated by energy movements and the associated implications for prices and yields.
- USTs are lower by 12 ticks at most, to a 110-16+ trough. If the move continues, we look to the 110-05+ mark from the 24th, and then the 109-31+ WTD base. Ahead, a handful of data points, numerous Fed speakers and supply features in a relatively busy schedule; however, geopolitics will likely continue to dictate.
- Bunds in-fitting. At a 125.30 low, with losses of nearly 70 ticks at most. If the move continues, we look to support at 125.02 and then the 124.77 WTD base. For Europe, newsflow is somewhat limited, with no move to a handful of data points or ECB officials. The region’s docket ahead is a little light, and as such, action will be determined by the above US points and/or Middle East developments.
- Gilts took the lead from peers and opened with losses of over 60 ticks before falling another 35 or so to a 87.73 trough. If the move continues, we look to recent bases at 87.06, 86.81 and then the contract low of 85.91. A busy BoE docket today, with Taylor and Greene scheduled; though, we have yet to see anything of pertinence from Breeden.
Commodities
- Crude futures gradually edged higher overnight and held onto that strength throughout the European morning, with Brent Jun’26 printing a USD 100.96/bbl peak (vs USD 97.69/bbl low) while WTI May’26 prints a current USD 94.13-90.71/bbl range.
- On the geopolitical front, US President Trump reportedly told aides that he wants a speedy end to the war and believes the conflict is in its final stages. Meanwhile, Israeli media reported that Trump may announce a ceasefire with Iran by next Saturday, even without a final agreement, while N12 News separately said the working assumption in Israel is that he could announce a ceasefire as soon as this coming Saturday. More recently, it was reported US Pentagon is reportedly preparing for a massive “final blow” of the Iran war, via Axios.
- Spot gold is lower after a two-day recovery, with bullion back under USD 4,450/oz at the time of writing, giving back most of the prior session gains, amid the conflicting US and Iranian statements. Spot gold currently resides in a USD 4,412-4,544/oz range after finding support on Monday at its 200-DMA (4,091.57/oz)
- Base metals are also softer, with copper under pressure as investors weigh the inflationary implications of the conflict alongside the risk of weaker global activity and softer demand. 3M LME copper resides in a USD 12,114.00- 12,276.08/t range at the time of writing.
- Russian Deputy PM Novak says “we will impose a gasoline export bank if necessary”; has possibility to increase oil production if required, but investment will be needed; is already trading oil without discount, and with a premium in a number of lines.
- French Commerce Minister said release of strategic oil reserves to be discussed at G7 minister meeting on Monday.
- Japan begins releasing national oil reserves, as expected, according to Kyodo.
- Turkish oil tanker was hit by a drone in the Black Sea near Istanbul.
- Saudi Arabia’s oil sales to China and India are set to be lower-than-usual levels next month, according to Bloomberg.
- Japan is reportedly to lift restrictions on coal-fired power plant operation as an emergency response to the Middle East situation for a one-year limit period, according to the Nikkei.
- Philippines suspends electricity market due to Middle East conflict and proposes modified administered pricing by April 1st, cites fuel supply risks and price volatility for the suspension.
- Pilbara ports in Australia said they closed the ports of Ashburton, Cape Preston West, Dampier and Varanus Island due to cyclone Narelle.
Central Banks
- Norges Bank maintains its rate unchanged at 4.0% as expected; “it will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings”. STANCE. The Committee judges that a tighter monetary policy stance is needed to return inflation to target within a reasonable time horizon. The inflation outlook indicates that an increase in the policy rate will likely be required. The Committee therefore wants to await further information on the prospects for inflation. FUTURE POLICY. The future path of the policy rate will depend on economic developments. If the outlook indicates higher inflation than currently projected, a higher policy rate than currently envisaged may be required.
- US Treasury Secretary Bessent said to have discussed ways to recast ties between the Fed and the Treasury in the Bank of England’s image, and praises BoE’s market intervention capabilities, according to FT.
- ECB’s de Guindos said the outbreak for the Iran war has made the growth and inflation outlook significantly more uncertain, sharp increase in energy prices poses upside risks for inflation and downside risks for economic growth. ECB is well positioned to navigate this uncertain period.
- ECB’s Nagel said the ECB will have enough data by April to determine if they need to act or whether to wait and see.
- ECB hopes to look through energy price shock from Iran war and Lagarde said it’s too early to know the impact of the Iran war, while it sees rates steady if shock is temporary but may hike rates twice if energy shock is persistent, according to FT.
- BoE’s Breeden (neutral) says firms and workers are likely to have less price and wage bargaining power, so second round effects less likely.
- BoJ Governor Ueda said large JGB holding doesn’t make policy adjustments difficult, adds conducting policy to achieve price stability target.
- RBA Assistant Governor Kent said the board will set monetary policy to achieve low and stable inflation and full employment. Will continue to assess the countervailing forces operating on the economy. Middle East conflict has tightened financial conditions. The longer the conflict persists, the larger the economic impacts will be.
- CNB Minutes (Mar): Ready to tighten policy if core inflation rises, agreed a rate hike is premature now.
- UBS expects the Fed to deliver two 25bps cuts in September and December (prev. saw cuts in June and September).
Geopolitics
- US Pentagon reportedly prepares for massive “final blow” of Iran war, Axios reported. The Pentagon developing military options for a “final blow” in Iran that could include the use of ground forces and a massive bombing campaign. Options include: Invading or blockading Kharg Island; Invading Larak, an island that helps Iran solidify its control of the Strait of Hormuz; seizing the strategic island of Abu Musa and two smaller islands, which lie near the western entrance to the strait and are controlled by Iran but also claimed by the UAE; Blocking or seizing ships that are exporting Iranian oil on the eastern side of the Hormuz Strait.
- Pakistan Foreign Minister says US-Iran indirect talks are taking place through messages being relayed by Pakistan.
- US President Trump says NATO nations have done absolutely nothing to help with Iran.
- US Pentagon is considering diverting Ukraine military aid to the Middle East, WaPo reported. Comes as the war in Iran depletes some of the US military’s most critical munitions, according to sources cited.
- US President Trump said Iran is negotiating and wants a deal, but is afraid to say so, adds no one in Iran wants to be Supreme Leader right now.
- Iran’s Foreign Minister said Iran’s current policy is to continue resistance in the face of ongoing unprovoked American-Israeli aggression while ruling out negotiations and ceasefire in the absence of required guarantees, according to Press TV. Vessels belonging to “friendly countries” including China, Russia, India, Iraq and Pakistan had been allowed to pass through the Strait of Hormuz.
- IRGC has reportedly imposed a de facto ‘toll booth’ regime in the Strait of Hormuz, requiring vessels to submit full documentation, obtain clearance codes and accept IRGC-escorted passage through a single controlled corridor, according to Lloyd’s List.
- US Central Command said USS Abraham Lincoln aircraft carrier continues to carry out strikes on military targets in Iran, while CENTCOM also said most of the Iranian facilities used to build missiles, drones and warships, are badly damaged or destroyed.
- Iranian-linked Handala Hack Group say they have “initiated a new phase of Operation Lockheed Martin (LMT)”, said Co. employees have 48 hours to respond, Mehr News reported.
- Pakistani official said Israel took Iran’s Foreign Minister Araghchi and Parliamentary Speaker Ghalibaf off the hit list after Pakistan requested the US not to target them.
- Iran targeting an American fuel supplier, according to a report cited by Tasnim.
- The IRGC naval commander was eliminated in Bandar Abbas, according to the Jerusalem Post citing an Israeli source.
- Hezbollah said it targeted headquarters of Israel’s Ministry of Defense with missiles on Thursday and barracks affiliated with the military intelligence department of Israel’s army in the north of Tel Aviv, was also one of the targets of the operation.
- Egypt’s Foreign Minister said Cairo is ready to host talks to support de-escalation between US and Iran, and backs President Trump’s push for negotiations, adding he hopes there will be direct talks between the two sides.
- UAE Foreign Minister discussed developments in the region and the repercussions of Iran’s missile attacks on the UAE and brotherly countries in a call with foreign ministers of Pakistan, Britain, Spain, France and Kazakhstan.
- Local sources say huge explosions occurred in the Amir Sultan Air Base in Saudi Arabia following drone attacks.
- Explosions heard in Iranian cities of Isfahan and Bandar Abbas.
- Arab sources report a loud explosion was heard in the capital of the UAE, according to SNN.
- Israel’s Ben Gurion airport halts all operations amid Iranian missile barrage, according to Press TV.
- Russia’s Kremlin says “we have not lost interest in peace talks”; territory is one issue that has not been settled.
- Ukrainian President Zelensky said Ukraine does not see any genuine desire from Russia to end the war.
- Russia attacked damaged ports and energy infrastructure in Ukraine’s Odesa region, according to the regional governor.
- UK authorises armed forces to board Russian shadow fleet tankers in British waters, according to The Guardian.
US Event Calendar
- 8:30 am: United States Mar 21 Initial Jobless Claims, est. 210k, prior 205k
- 8:30 am: United States Mar 14 Continuing Claims, est. 1849k, prior 1857k
- 4:00 pm: United States Fed’s Cook Speaks on Financial Stability
- 6:30 pm: United States Fed’s Miran Speaks on Balance Sheet
- 7:00 pm: United States Fed’s Jefferson Speaks on the US Economy
- 7:10 pm: United States Fed’s Barr in Moderated Conversation
DB’s Jim Reid concludes the overnight wrap
As we go to press this morning, oil prices are moving higher again, with Brent crude up +1.86% overnight to $104.12/bbl. Several factors are responsible, but a big one is that Iran have continued to reject the messages from the US about some kind of deal, raising questions about whether there is really an off-ramp to the conflict in the days ahead. Indeed, market attention is quickly turning to the end of Trump’s 5-day deadline from Monday, when he said he’d postpone strikes against Iranian power plans and energy infrastructure. So that’s just over 48 hours away now, and multiple outlets have reported that thousands of US troops have been sent to the region. So the prospect of a fresh escalation is still top of mind for investors.
That shift in sentiment has hit global markets this morning, with futures on the S&P 500 (-0.20%) and the DAX (-0.49%) both lower, whilst 10yr Treasury yields (+2.6bps) are back up to 4.36%. Indeed, the 2yr Treasury yield (+3.1bps) is currently at 3.91%, the highest since July. Meanwhile in Asia, the major equity indices have lost ground as well, with the Nikkei (-0.52%), the Hang Seng (-1.43%), CSI 300 (-0.62%), Shanghai Comp (-0.67%) and the KOSPI (-2.70%) all falling back. Moreover, Japanese bond yields have continued to rise, with the 2yr JGB yield (+3.2bps) up to 1.32% this morning, which is the highest it’s been since 1996. So it’s a tough morning across the board.
For markets, the issue is there’s still plenty of doubt about whether a US-Iran deal can be reached, given how Iran have publicly rejected the US on several occasions. So that’s seen markets become increasingly sceptical about positive headlines from the US side, because we haven’t seen similar noises from Iran. For a sense of the difference, it’s been widely reported that the US have a 15-point plan, which includes the dismantling of Iran’s nuclear facilities and reopening the Strait of Hormuz. That hasn’t been confirmed by the White House, but Press Secretary Leavitt said there were elements of truth to the reports. Meanwhile, CNN reported yesterday that Vice President JD Vance might travel to Pakistan this weekend for a meeting to discuss an off-ramp. And White House Press Secretary Leavitt said that the US was engaged in “productive conversations”. So all that suggested some kind of progress towards a ceasefire.
By contrast, we’ve had much more negative rhetoric on the Iranian side. Indeed, oil prices moved higher after Iran’s Fars News cited sources who said the moves by Trump to start indirect talks were illogical and not viable at this stage. Then, Iran’s Press TV cited an official who said Iran would end the war when it chose, and when its conditions were met, including security guarantees and recognition of Iran’s authority over the Strait of Hormuz. Later on, Reuters also reported that Iran has demanded for Lebanon to be involved in any ceasefire, implying an end to Israel’s offensive against Hezbollah. So by the close, that meant Brent crude had risen from $97.30/bbl during the European morning to end the US session at $102.22/bbl, before its latest climb this morning to $104.12/bbl.
Before that, markets had seen a more positive session yesterday when oil prices were lower, as that helped to ease concerns on the extent of any inflation shock. So that led investors to dial back their expectations for rate hikes this year, which in turn helped bonds and equities on both sides of the Atlantic. For the Fed, that meant just 4bps of hikes were priced for this year by the close, down -1.8bps on the day. And for the ECB, the probability of a hike at the next meeting in April came down from 86% to 62% by the close.
For the ECB, that shift in market pricing followed comments from ECB President Lagarde, who said they would “not act before we have sufficient information on the size and persistence of the shock and its propagation”. So that offered some reassurance against an imminent hike, although she also said they were “prepared, if appropriate, to make changes to our policy at any meeting”. Separately, we also had the latest Ifo business climate indicator from Germany, which fell to a 13-month low of 86.4 in March (vs. 86.3 expected). So again, that cemented investor conviction that the European economy was slowing down given the conflict, in line with what the flash PMIs had shown the previous day.
Given all that, sovereign bonds rallied across Europe, with yields on 10yr bunds (-7.0bps), OATs (-10.6bps) and BTPs (-11.6bps) all posting large falls. Moreover, 10yr UK gilts (-11.7bps) saw a decent decline as well, despite some upside surprises in the latest CPI print yesterday. That showed headline CPI remained at +3.0% in February, as expected, but core CPI unexpectedly moved up to +3.2% (vs. +3.1% expected). And in the US it was a similar story, with yields falling back as investors priced in less inflation and fewer rate hikes. So the 2yr yield (-0.4bps) fell to 3.9%, and the 10yr yield (-3.0bps) fell to 4.33%. Interestingly, that also pushed the 2s10s Treasury curve down to 44bps, which is the flattest it’s been since July.
For equities, it was a decent session across the board yesterday too. In the US, the S&P 500 (+0.54%) advanced, and remains on track for its first weekly gain since the strikes began, having risen +1.31% over the three days so far this week. That gain was supported by a decent performance for the Magnificent 7 (+0.78%), whilst small-caps in the Russell 2000 (+1.23%) hit a two-week high. Those moves came as the VIX index (-1.62pts to 25.33) eased to its lowest level since last Thursday. Meanwhile, gold (+0.68%) posted back-to-back gains for the first time in three weeks.
Over in Europe, the STOXX 600 (+1.42%) also did well, posting a third consecutive advance for the first time since the strikes began, taking it up to a one-week high. And that was echoed elsewhere, with the DAX (+1.41%), the CAC 40 (+1.33%) and the FTSE MIB (+1.48%) all posting solid gains.
Looking at the day ahead, data releases include the US weekly initial jobless claims, the Kansas City Fed’s manufacturing index for March, and the Euro Area money supply for February. Central bank speakers include the Fed’s Cook, Miran, Jefferson and Barr, along with the ECB’s de Guindos and Muller, and the BoE’s Breeden, Taylor and Greene.
