Stocks Climb, Bonds Falter as Oil Prices Slide: Markets Wrap
(Bloomberg) — US stocks pushed higher as optimism grew that the war in the Middle East is nearing a conclusion, pulling Brent briefly below $100 a barrel. Treasuries wavered while the dollar was on track for a second straight day of declines.
The S&P 500 is poised to add 0.4% to its biggest daily advance since May, driven by President Donald Trump saying he foresaw the US ending the war with Iran within two to three weeks. European stocks jumped 2.3%, alongside a 4.9% surge in Asian shares.
Trump on Wednesday said Iran has asked for a ceasefire, which he will consider when the Strait of Hormuz is “open, free, and clear,” according to a post on Truth Social.
Brent fell 5.4% before trimming the loss as the Strait of Hormuz remained largely closed and attacks continued across the Gulf. The two-year Treasury yield climbed to near 3.80%, following solid data on the US labor market and retail sales. Traders now see a roughly 35% chance of a Federal Reserve interest-rate cut in December.
“A combination of euphoria, exuberance, and relief has driven a considerable rebound in risk appetite over the last day or so, as hopes grow for a swift end to conflict in the Middle East,” said Michael Brown, a senior research strategist at Pepperstone Group Ltd., in a note to investors. Markets are concluding that “no war is a much better scenario for the global economy than a continued conflict.”
Trump, who will give an address at 9 p.m. Eastern Time 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 to conclude the war.
“We are seeing a relief rally, and with more information we may see a reversal, so we just need to be careful here,” Remi Olu-Pitan, multi-asset growth and income head at Schroders, told Bloomberg TV. “There’s still a lot of volatility, the market is still fragile.”
Chipmakers extended their rebound in premarket trading, with Sandisk Corp. rising 3%. Nike Inc. plunged 11% after a gloomy outlook. Miners including AngloGold Ashanti Plc and Newmont Corp. climbed as gold advanced for a fourth straight day, topping $4,700 an ounce.
What Bloomberg strategists say…
“The sea of green in stocks is a classic sign of markets starved for good news latching onto a sliver of hope, but traders need to look at crude prices — not headlines — as a true barometer of what the global economy is up against.”
— Ven Ram, macro strategist. For the full analysis, click here.
Traders at Goldman Sachs Group Inc. and JPMorgan Chase & Co. suggested Tuesday’s sharp rebound in US stocks was more about the unwinding of negative positioning by market participants than a shift in sentiment over the war.
“Investors have been counting on a swift off-ramp to war essentially since it began, but I think from a market or global economy perspective it’s important to define what the true clearing event to revisit risk and take down recession odds really is,” wrote JPMorgan industrials sector specialist sales Paige Hanson.
Investors said it would take time for oil flows to return to normal even if the war ends within Trump’s timeframe, especially given the damage to some energy facilities. Trump’s team has also suggested that reopening the Hormuz strait, which carries 20% of global crude, may not be necessary to end the hostilities.
While Trump has called on other nations to take control of the Strait of Hormuz, the United Arab Emirates is so far the only Gulf Arab country that has said it will join a naval force to try to reopen the waterway or provide escorts. Bahrain is working on a UN Security Council resolution for such a task.
“I would expect further volatility in the days to come and the market to oscillate between losses and gains for a few more sessions until we get clarity on how the crisis unfolds,” said Alexandre Baradez, chief market analyst at IG Markets. “This is likely more a temporary respite than a final game changer.”
Corporate News:
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. Microsoft Corp. is in exclusive talks with Chevron Corp. and investment fund Engine No. 1 over a long-term deal that would underpin a giant energy complex in West Texas. Anthropic PBC inadvertently released source code for its popular Claude AI agent, raising questions about its operational security and sending developers on a search for clues about the startup’s plans.
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.4% as of 8:59 a.m. New York time Nasdaq 100 futures rose 0.6% Futures on the Dow Jones Industrial Average rose 0.3% The Stoxx Europe 600 rose 2.3% The MSCI World Index rose 0.9% Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.4% to $1.1603 The British pound rose 0.6% to $1.3304 The Japanese yen rose 0.1% to 158.54 per dollar Cryptocurrencies
Bitcoin rose 0.2% to $68,339.68 Ether rose 1.1% to $2,128.9 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.33% Germany’s 10-year yield declined two basis points to 2.98% Britain’s 10-year yield declined six basis points to 4.86% Commodities
West Texas Intermediate crude fell 0.7% to $100.66 a barrel Spot gold rose 1.3% to $4,727.18 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Julien Ponthus, Subrat Patnaik, Jan-Patrick Barnert and Isabelle Lee.
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