US Stocks Mixed as Oil Rallies and War Continues – Dow down 0.6%
US equity markets experienced another choppy trading session overnight as investors continued to monitor developments in the Middle East. The Dow Jones led the declines, falling 0.61% to close at 47,417, while the S&P 500 and Nasdaq closed near flat. The S&P slipped 0.08% to finish at 6,775, while the Nasdaq managed to edge slightly higher, rising 0.08% to end the session at 22,716. In currency markets, the US Dollar eventually strengthened in whippy trading during the day, with the DXY rising 0.35% to 99.26 by the close as higher Treasury yields supported the greenback. US bond markets saw yields push higher again as traders continued to scale back expectations for Federal Reserve rate cuts. The US 2-Year Treasury yield rose 6.3 basis points to 3.653%, reaching its highest level in five months, while the US 10-Year Treasury yield climbed 7.4 basis points to 4.230%. Oil prices rose as concerns over developments in the Middle East increased. Brent crude jumped 5.96% to $93.03, while WTI crude rose 5.93% to $88.41. In precious metals, Gold moved lower as higher US yields and a stronger US Dollar weighed, falling 0.31% to close at $5,175.46.
Oil Volatility Still Dominating Financial Markets
Energy markets were once again a major focus for traders during the day yesterday, with oil prices surging despite the International Energy Agency announcing plans to release a record level of oil stocks. They pledged to release 400 million barrels of oil to stabilise energy prices, but conflict concerns outweighed this during the day’s trading. The market remains highly sensitive to the risk of supply disruptions linked to the ongoing Middle East war, and news that the conflict seems to be escalating rather than receding, as had been hoped, is weighing heavily on investor sentiment and lifting inflationary concerns. Three vessels were hit in the Straits of Hormuz and the Persian Gulf yesterday, bringing the total to fourteen since the war began, and traders are now trying to factor in the implications for supply even if a swifter resolution is achieved. For now, most market participants are factoring in topside risks, with any dips likely to be seen as buying opportunities until we have a clear resolution in place and the prospect of a return to normal supply conditions in the Gulf.
Geopolitics to Dominate in Light Calendar Day
Looking ahead to today’s trading sessions, the macroeconomic calendar remains relatively light, meaning geopolitical developments are likely to continue driving market sentiment. There is very little on the calendar in the Asian session today, and it is relatively quiet in the latter two sessions. The European session will see a focus on UK markets midway through the day, with Bank of England Governor Andrew Bailey scheduled to speak in London. The New York session sees the release of the usual Weekly Unemployment Claims data (exp 214k), which may provide further clues on the strength of the US labour market. However, it is likely that updates on the newswires will prove to be the major source of direction again as the day progresses.
