US Stocks Tread Water as Peace Negotiations Roll On – Dow up 0.5%
US equity markets closed modestly higher overnight, although trading conditions remained choppy as investors continued to assess developments surrounding a possible peace agreement in the Middle East. While optimism around a deal continues to provide some support for risk sentiment, ongoing divisions between the parties kept markets cautious throughout the session.
The Dow Jones led the gains, rising 0.55% to close at 50,258, while the S&P 500 added 0.17% to finish at 7,445. The Nasdaq also edged higher, gaining 0.09% to close at 26,293. Despite the positive finish for equities, broader market conviction remained limited as traders continued to monitor geopolitical headlines closely.
Currency markets saw the US dollar push slightly higher, with the Dollar Index rising 0.11% to 99.20. In bond markets, Treasury yields were mixed on the session, with the US 2-year yield climbing 3 basis points to 4.085%, while the benchmark 10-year yield eased 1.6 basis points lower to 4.570%.
Oil prices drifted lower amid ongoing uncertainty surrounding developments in the Gulf region. Brent crude slipped 0.16% to settle at $104.96 per barrel, while WTI crude fell 1.94% to $96.35 per barrel. Gold prices were little changed on the day, edging down just 0.03% to close at $4,543.12 per ounce as traders remained cautious ahead of the weekend.
Oil Primed for Moves into the Weekend
Global markets are holding their breath on the last trading day of the week, with oil in particular set for some big moves if we get strong updates either way on the ongoing negotiations between Iran and the US. Oil prices have fallen hard in the last few days as signs that a deal could be concluded have increased, but the further the situation drags on, and the more headlines that emerge showing divisions still exist, the more likely we are to see investor concerns increase again and oil prices move higher.
WTI has dropped over 12% from peak to trough this week and now sits within striking distance of strong support levels on the daily chart, with trendline support now sitting near last night’s low of $95.76 a barrel. News of an agreement in the coming sessions should see it extend its move south, with a break there likely to lead to a strong move down toward the next major levels around the $80 mark. However, further delays will probably see it move back into recent ranges, whilst confirmation that hostilities will resume should see it move swiftly back towards the $110 level at least.
Middle East Peace Hopes to Dominate Trading Today
Looking ahead to today’s trading sessions, traders are expecting geopolitics to remain the key market driver into the end of the week. There is little on the calendar in the Asian session, and the market is expected to remain in range-bound conditions ahead of any fresh updates regarding the US-Iran ceasefire. In the later two sessions, however, economic data releases may still generate pockets of volatility, with UK Retail Sales (exp. -0.6% m/m) due during the European session, while attention in North America will turn to Canadian Retail Sales (exp. +0.6%) and Core Retail Sales (exp. +0.9%), which should see some volatility in the pound and loonie respectively.
The New York session also sees the release of the revised University of Michigan Consumer Sentiment (exp. 48.2) and Inflation Expectations (last 4.5%) data out of the United States. However, once again, geopolitical updates are expected to dominate sentiment into the weekend, with anything fresh coming later in the day likely to lead to exacerbated moves in the thinner late-session liquidity.
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