Stocks, Bonds Rise on Optimism Iran War Nears End: Markets Wrap
(Bloomberg) — Stocks and bonds extended gains on optimism the Middle East conflict that jolted global markets and disrupted energy supplies may be nearing a conclusion.
Asian shares jumped 4.3% to bounce back from their worst month in more than 17 years, after President Donald Trump said he foresaw the US ending the war with Iran within two to three weeks. The advance followed gains on Wall Street as optimism grew that a resolution will ease crude oil flows and support economic growth. European index futures jumped 1.7%.
The dollar edged lower and Treasuries continued their run of gains on Trump’s comments. Still, with uncertainty over the war and the status of the Strait of Hormuz, crude retraced some of the losses it made on Tuesday, with Brent edging back above $105 a barrel.
A resolution would likely restore investor confidence after the five-week conflict roiled energy and equity assets, pushing some gauges into correction territory. The focus will also turn to policymakers’ response to elevated energy costs and supply disruptions and their impact on the economy, as well as whether corporate earnings later this month reflect the strain on growth.
“The prospects of the U.S. looking to de-escalate can help with short-term risk appetite, as reflected in the past 24 hours,” said Tai Hui, Asia Pacific chief market strategist at JPMorgan Asset Management. “However, we may still experience some volatility if the Trump administration were to revise its military strategy.”
Trump, who will give an address to the nation at 9 p.m. Eastern Time Wednesday to provide an “important update” on Iran, said the Islamic Republic could still reach a deal with the US. He added, however, that an agreement with Tehran isn’t a prerequisite for the war to conclude.
Iran has “the necessary will to end this war,” but expects certain requirements to be met “especially the essential guarantees to prevent the recurrence of aggression,” the Islamic Republic’s president Masoud Pezeshkian told the President of the EU Council António Costa in a call Tuesday.
“Markets are reading this as a full-on positive, in that we see an end to the conflict,” said Nick Twidale, chief market analyst at AT Global Markets in Sydney. “Personally, I’m not convinced over the longer term. I think we have more news-driven volatility in the days ahead, and investors will soon want concrete evidence that the end of the war is in sight.”
In other corners of the market, gold advanced for a fourth day to trade near $4,700 an ounce. Despite the rebound in the past few days, bullion’s near 12% decline in March was its worst monthly performance since October 2008.
The Bloomberg Dollar Spot Index slipped 0.1%. The gauge rose 2.4% last month, with the greenback emerging as the haven of choice during the war. Treasuries extended their gains with the yield on the benchmark 10-year falling two basis points to 4.29%.
A gauge of Asian technology shares jumped 6.8% with chipmakers such as Samsung Electronics Co. and SK Hynix Inc. surging more than 9%. Gains were broad based across the wider market, with eight shares advancing for every one that declined in the MSCI Asia Pacific Index.
What Bloomberg strategists say…
“While stocks and bonds are rallying on fresh optimism that a path is opening for the US-Iran war to end, Asian risk assets face the potential for sustained underperformance given the likelihood that the Strait of Hormuz will be restricted at best over the medium term.”
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
It is unclear how concrete the latest timeline offered by the president will be. Trump is known to frequently offer two weeks as the potential timeframe for big decisions — imposing deadlines on his own administration and regularly blowing past them. The US has also moved additional troops into the region in recent days, preserving the possibility for future escalation if Trump changes his mind.
A third US aircraft carrier strike group is heading to the Middle East as military operations against Iran continue, according to a US official familiar with the matter, after the Navy’s flagship carrier left the region for repairs.
Meanwhile, the Wall Street Journal reported that the United Arab Emirates is preparing to help the US and other allies open the Strait of Hormuz by force, Arab officials said.
Trump called on other nations to take control of the Strait of Hormuz, expressing his frustration that the monthlong war is unresolved and the latest sign he is looking to exit the conflict as oil and gas prices surge.
“With oil prices still hanging around triple digits, and mixed messaging around the fate of the Strait of Hormuz, it’s not exactly clear sailing yet for markets,” said Tim Waterer, chief market analyst at KCM Trade.
Corporate News:
Nike Inc.’s shares extended declines after the company projected a drop in revenue for the current quarter, exacerbating investor concerns that the war in Iran could hurt turnaround efforts. OpenAI has completed a deal to raise $122 billion from investors at an $852 billion valuation, marking the company’s largest funding round to date. Nvidia Corp. is taking a $2 billion stake in Marvell Technology Inc. and opening up its system to allow Marvell to integrate custom artificial intelligence chips and networking equipment on the platform. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 12:57 p.m. Tokyo time Nikkei 225 futures (OSE) rose 4.3% Japan’s Topix rose 3.9% Australia’s S&P/ASX 200 rose 2% Hong Kong’s Hang Seng rose 2% The Shanghai Composite rose 1.4% Euro Stoxx 50 futures rose 1.8% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1561 The Japanese yen was little changed at 158.85 per dollar The offshore yuan was little changed at 6.8882 per dollar Cryptocurrencies
Bitcoin fell 0.2% to $68,081.34 Ether fell 0.2% to $2,100.9 Bonds
The yield on 10-year Treasuries declined two basis points to 4.29% Japan’s 10-year yield declined three basis points to 2.315% Australia’s 10-year yield declined six basis points to 4.91% Commodities
West Texas Intermediate crude rose 1.6% to $102.98 a barrel Spot gold rose 0.3% to $4,680.05 an ounce This story was produced with the assistance of Bloomberg Automation.
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