Finance
Nervous markets await Israel’s response and Fed prospects
A look at the day ahead at Rae Wee’s European and global markets
European shares look set to follow Asia’s negative lead on Monday, after a weekend dominated by news of escalating tensions in the Middle East and fears of a wider regional conflict.
The flight to safety began last week with talks about an Iranian attack on Israel and after an attack with some 300 drones and missiles, the focus is now on Israel’s response. [MKTS/GLOB]
Gold and the US dollar were firm, although the former safe-haven yen fell to its lowest level in three decades – a reminder that market participants still view the Middle East as primarily a risk, albeit a growing one, while the interest rates remain the main risk. theme. [FRX/]
To somewhat limit that risk, US President Joe Biden told Israeli Prime Minister Benjamin Netanyahu that the US will not participate in a counter-offensive against Iran.
Yet the Cboe Volatility Index, or VIX – known as Wall Street’s fear gauge – is hovering around a five-month high.
Oil prices traded lower in Asia, although some analysts said this was because the risk of what Iran called retaliation was already priced in last week and as traders wait to see if concerns about a broader war will materialize.
Brent futures were hovering around $90 a barrel after hitting a six-month high on Friday. It is up 17% this year, while US crude futures are up 19% this year.
Any further rise in oil prices towards $100 a barrel will be unwelcome news for central bankers battling rising consumer prices as last week’s better-than-expected US consumer price report continues to reverberate through markets.
Later in the day, traders will get a sense of the strength of the US consumer, thanks to retail sales figures for the past month.
A slew of Federal Reserve speakers are also scheduled to appear this week, with Chairman Jerome Powell’s comments taking the spotlight on Tuesday.
With US inflation exceeding expectations for three months in a row, it is difficult to imagine that the world’s most powerful central banker will continue to follow the same somewhat dovish tone of last month.
While the geopolitical backdrop is likely to set the tone for the week, there are also plenty of economic events for traders to rely on, from China’s first-quarter economic growth figures to UK consumer prices.
The US earnings season has also started, but it got off to a mediocre start after reports from the three big banks – JPMorgan Chase & Co, Wells Fargo and Citigroup – disappointed investors and sent Wall Street lower.
Key developments that could impact the markets on Monday:
– Industrial production in the eurozone (February)
– US retail sales (March)
– Goldman Sachs, Charles Schwab earnings
– Mary Daly and Lorie Logan from the Fed speak
(By Rae Wee; editing by Christopher Cushing)
