Stocks Slip, Oil Gains With Focus on US-Iran Talks: Markets Wrap
(Bloomberg) — Stocks edged lower alongside bonds and crude oil climbed as persistent tensions in the Middle East and conflicting signals from the US and Iran about their ceasefire talks sapped sentiment.
Asian shares fell 0.6%, snapping a two-day rise, while bonds retreated as elevated oil prices threatened to stoke inflation and slow economic growth. Equity-index futures for the US and Europe wavered. The MSCI All Country World Index — the broadest measure of global equities — is set for its first drop this week, indicating the optimism at the start of the week may be fading.
On Thursday, Israel said it completed a wave of strikes in Isfahan, Iran, targeting infrastructure in several areas. Brent crude climbed to a session high of $104.12 a barrel, rebounding from the previous session when reports of US-Iran talked eased market concerns. Since then, while the US insisted talks were ongoing, Iran rejected outreach by President Donald Trump. Oil has been volatile this week, with losses typically followed by gains the following day.
Yields on benchmark 10-year Treasuries rose two basis points to 4.35% as higher oil prices stoked inflation concerns, reinforcing expectations that policymakers may keep rates elevated or even consider tightening. Bonds fell in Japan and Australia too.
“Markets have been extremely headline driven as we keep getting different, conflicting messages on the Iran situation,” said Fabien Yip, a market analyst at IG International. “Markets need more certainty on what the outcome would be. Until there is agreement on the truce terms, unfortunately we will still see these swings.”
Markets had been modestly optimistic this week as US efforts to end the conflict have gained momentum, overshadowing reports that Iran rejected a truce and continued strikes. Amid the mixed signals on negotiations, Washington ordered thousands of troops to the region, raising concerns Trump may be gearing up for the kind of risky ground invasion he once opposed.
Trump has been pushing for talks with Iran in a bid to halt a conflict that’s approaching the four-week mark. The White House said the US has been in productive talks with Iran in the last three days and has compiled a plan stipulating the Islamic Republic dismantle its main nuclear facilities and use a reduced missile arsenal in self-defense only.
What Bloomberg strategists say…
“Investors may be finding it increasingly difficult to discount the energy shock’s mounting economic toll. Until the more optimistic rhetoric out of the US is backed by more tangible actions to reopen the Strait of Hormuz, the path of least resistance for regional equities remains tilted to the downside.”
— David Savage, Macro Squawk. For full analysis, click here.
But Tehran is signaling little willingness to compromise. A move by the US to start indirect talks is illogical and not viable at this stage, semi-official Fars news agency reported. Amid all this, traders stayed focused on the Strait of Hormuz — a vital artery for Middle East oil flows — that remains effectively closed for ships.
“Markets are positioning for a conflict resolution, despite lingering strategic ambiguity,” said Elias Haddad at Brown Brothers Harriman & Co. “Ultimately, Iran’s response to the US de-escalation pivot will decide whether peak fear is behind us or still ahead.”
Iran has its own conditions for a ceasefire, state-owned Press TV added, citing an unnamed senior security official. The nation wants guarantees the US and Israel won’t resume their attacks as well as reparations for damages and recognition of its authority over the Strait of Hormuz.
Meanwhile, BlackRock Inc. President Rob Kapito said investors may be underestimating the risks stemming from the Iran war, which are likely to weigh on growth and drive inflation higher even if the conflict ends soon.
In other corners of the market, Japan’s two-year government bond yield climbed to its highest level since 1996, as expectations build for a near-term Bank of Japan rate hike. A Bloomberg gauge of the dollar was flat.
Shares in South Korea fell 3%. Asian memory and storage stocks tracked losses in US peers on concerns of lower demand, after Google researchers touted a new compression technique for large language models and vector search engines.
Meanwhile, concerns over the conflict in the Middle East have rippled across Asia. South Korea has set up an emergency task force to prepare for adverse scenarios, Japan is reviewing its supply chain for petroleum-related products and the Philippines has declared a national emergency.
“There’s really no way to know at this point what the facts are regarding the state of negotiations, so expect more whipsaw action as things continue to progress,” said Bespoke Investment Group strategists. “While Iran still holds some cards, the chips are stacked heavily against them.”
Corporate Highlights:
JetBlue Airways Corp. is considering the option of selling itself to a competitor, Semafor reported, citing people familiar with the matter. Meta Platforms Inc. is cutting several hundred jobs as part of a restructuring effort that’s impacting several teams at the company, including sales, recruiting and the Reality Labs hardware division. Arm Holdings Plc, which made its name licensing technology to semiconductor makers, said it will sell its own chips for the first time — a move forecast to generate about $15 billion annually within five years. Merck & Co. agreed to buy Terns Pharmaceuticals Inc. for $6.7 billion, giving the multinational company access to a promising new leukemia treatment as it faces the patent expiration of its bestselling cancer drug. Indian billionaire Gautam Adani is in talks with American technology giants including Meta Platforms Inc. and Google for partnerships in his fast-expanding data center business Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 1 p.m. Tokyo time Japan’s Topix fell 0.4% Australia’s S&P/ASX 200 fell 0.1% Hong Kong’s Hang Seng fell 1.4% The Shanghai Composite fell 0.6% Euro Stoxx 50 futures fell 0.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1569 The Japanese yen was little changed at 159.46 per dollar The offshore yuan was little changed at 6.9053 per dollar Cryptocurrencies
Bitcoin fell 0.2% to $70,873.07 Ether fell 0.6% to $2,152.37 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.35% Japan’s 10-year yield advanced two basis points to 2.270% Australia’s 10-year yield advanced four basis points to 5.00% Commodities
West Texas Intermediate crude rose 1.6% to $91.75 a barrel Spot gold rose 0.3% to $4,517.45 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Richard Henderson and Sarah Chen.
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