Markets Rally on Middle East Peace Hopes – Nasdaq up 1.5%
Global equity markets rallied strongly overnight after President Trump advised that negotiations between the US and Iran were in their “final stages”, boosting hopes that tensions in the Middle East may continue to ease and potentially paving the way for the reopening of the Strait of Hormuz. The improvement in risk sentiment saw all three major US indices finish firmly higher on the session, while US Treasury yields retreated from recent highs and the US dollar weakened against the major currencies.
The Dow Jones rose 1.31% to close at 50,009, while the S&P 500 gained 1.08% to finish at 7,432. Technology stocks again outperformed, helping lift the Nasdaq 1.54% higher to close at 26,270.
In currency markets, the US Dollar Index slipped 0.19% to 99.14 as easing geopolitical concerns and falling Treasury yields weighed on the greenback. Bond markets also rallied, with the US 2-year Treasury yield falling 6.3 basis points to 4.055%, while the benchmark 10-year yield declined 8.1 basis points to 4.586%.
Oil prices came under heavy pressure following the developments surrounding Iran, with traders unwinding some of the significant geopolitical premium built into crude markets in recent weeks. Brent crude fell 5.32% to settle at $105.33 per barrel, while WTI crude dropped 5.05% to $98.92 per barrel.
Gold prices moved higher despite the improvement in overall market sentiment, with the metal continuing to trade more closely in line with US dollar movements rather than traditional haven demand. Gold gained 1.37% on the session to finish at $4,544.19 per ounce.
Yen Traders on Edge Again
Yen traders are once again on edge, with USDJPY in particular trading in very tight ranges over the last few days. Traders are conscious that the Japanese authorities are monitoring the currency very closely at the moment, and the potential for intervention is high. USDJPY has topped out a few times just above 159.00 in the last few trading days, and some market participants feel the Bank of Japan may still be active, although in a more passive manner than what we saw at the end of April and a few times since. Fundamentals are clearly still pointing for the pair to move higher against the Ministry of Finance’s wishes, and the market feels that if we approach the key 160.00 level, we could see some more aggressive action again. For now, some traders are playing the market from the long side in line with fundamentals but are prepared to stop reverse on any intervention runs.
Busy Data Calendar Competes with Geopolitics Today
Given the moves we have seen overnight and the main drivers behind them, there is no doubt that geopolitics will have a substantial impact on the trading sessions ahead of us today. However, there is a busy economic calendar for traders to navigate as well. The initial focus in the Asian session will be on Australian employment data, with the Employment Change data expected to show a 16k gain last month and the Unemployment Rate remaining steady at 4.3%. There is a raft of Flash PMI figures being released across Europe, the UK, and the US later tonight. Traders will also be watching comments from Bank of England Governor Andrew Bailey later in the day, alongside US Weekly Unemployment Claims (exp. 210k) and the Philly Fed Manufacturing Index (exp. 17.6), for further clues on the state of the US economy and central bank expectations.
Explore all upcoming market events in the Economic Calendar.
