Stocks Fall With Bonds as Iran Concerns Boost Oil: Markets Wrap
(Bloomberg) — Stocks and bonds dropped as stalled US-Iran talks and the continued closure of the Strait of Hormuz drove oil prices higher, souring risk sentiment after a record rally on Wall Street.
MSCI’s Asia Pacific equity gauge fell 1.1%, with decliners outnumbering advancers almost four to one, as higher oil prices damp the outlook for economic growth. Futures contracts for the S&P 500 Index and the tech-heavy Nasdaq 100 both dropped 0.6%, after the underlying gauges closed at a record high on Wednesday on robust corporate earnings and the extension of the US-Iran ceasefire.
Brent crude climbed 1.5% to $103.40 a barrel, putting it on track for a fourth straight day of gains, due to a lack of progress in US-Iran talks. The benchmark has surged 70% this year, with most of the advance coming after the Middle East conflict started in late February. Bonds fell as higher oil prices stoked inflation concerns.
While President Donald Trump said a truce with Iran would remain in place indefinitely, investors remain wary of the lack of progress in talks to resolve the nearly two-month conflict. The longer the war drags on and the Strait of Hormuz stays shut, keeping oil prices elevated, the greater the risk of significant economic fallout for economies worldwide.
“Markets have taken a glass-half-full view during this conflict, hoping for a quick resolution and normalization of energy flows through the Strait,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney. “I still think markets will soon come to realization the path to a long lasting agreement is still some way away and energy prices will likely increase further before easing.”
Tensions remain high as the US and Iran failed to meet for a fresh round of peace talks, with both sides blocking the waterway to gain leverage during an extended ceasefire. Tehran says it has no plans to take part in negotiations imminently.
The US maintained a naval blockade on ships going to and from Iran’s ports to pile pressure on the Islamic Republic, in a move Iranian Foreign Minister Abbas Araghchi called a violation of the ceasefire.
What Bloomberg Strategists Say…
“There is a high motivation for taking chips off the table as the MSCI World index is up more than 8% this month and the calendar is full of major central bank meetings next week. Traders will also be wary of sudden talk about a super-cycle of demand in AI. Typically it is just when there is broad recognition of a theme, it is time to take some profits.”
— Mark Cranfield, MLIV. To read the full analysis, click here.
Treasuries headed for a fourth day of losses, with the 10-year yield rising two basis points to 4.32%, while the dollar gained against most of its major peers.
In other corners of the market, gold slipped 0.8% to about $4,700 an ounce, while silver declined 2% to about $76.15 an ounce. Bitcoin was a touch weaker at about $77,800.
Technology stocks, which rallied at the start of Asian trading on robust corporate earnings, also erased gains. MSCI’s gauge for tech stocks in the Asian region fell 0.7%.
South Korea’s Kospi Index — a poster child for artificial intelligence investments — erased an earlier jump of 2.2% to trade 0.7% lower.
One positive news was strong earnings from companies. Boeing Co. jumped on solid first-quarter deliveries. Tesla Inc. reported earnings that beat estimates. Texas Instruments Inc. gave a strong forecast for the current period. In Asia, SK Hynix Inc. reported a five-fold increase in profit.
Robust corporate profits, the revival of the artificial-intelligence trade and an otherwise resilient economy have buoyed stocks despite lingering geopolitical risks. Nearly 80% of the S&P 500 companies reporting first-quarter results have beaten analyst earnings estimates so far, according to data compiled by Bloomberg.
The Philadelphia Stock Exchange Semiconductor Index gained for a record 16th day as investors bet on continued strength driven by artificial intelligence-related demand.
“The recent rally in Asia tech despite ongoing supply chain disruption suggests investors are increasingly looking through near-term geopolitical risks,” said Gary Tan, a fund manager at Allspring Global Investments. “But a sustained re-rating versus the US will likely hinge on capex signals from hyperscalers in next week’s earnings reports.”
Corporate Highlights:
International Business Machines Corp. posted quarterly sales in its software unit that were in line with estimates, failing to shake investor concerns about AI disruption to its business. Lululemon Athletica Inc. named Heidi O’Neill its new chief executive officer as the athletic retailer looks to move beyond a turbulent period of slowing growth and investor unrest. Taiwan Semiconductor Manufacturing Co. will hold off on deploying ASML Holding NV’s most cutting-edge lithography machines for chip production through 2029 to save money, dealing a potential setback to the Dutch maker of the costly equipment. European car sales jumped the most in nearly two years in March as strong growth for fully electric and hybrid models powers a recovery in the region’s contested auto market. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.7% as of 12:55 p.m. Tokyo time Japan’s Topix fell 1.4% Australia’s S&P/ASX 200 fell 0.8% Hong Kong’s Hang Seng fell 1.1% The Shanghai Composite fell 0.8% Euro Stoxx 50 futures fell 1.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1695 The Japanese yen was little changed at 159.53 per dollar The offshore yuan was little changed at 6.8360 per dollar Cryptocurrencies
Bitcoin fell 1% to $77,695.82 Ether fell 2.3% to $2,337.79 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.32% Japan’s 10-year yield advanced one basis point to 2.405% Australia’s 10-year yield advanced four basis points to 5.00% Commodities
West Texas Intermediate crude rose 1.8% to $94.66 a barrel Spot gold fell 0.8% to $4,703.27 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Winnie Hsu.
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