Stocks Pare Gain, Oil Climbs as US Strikes Iran: Markets Wrap
(Bloomberg) — Stocks trimmed gains and crude oil advanced after US strikes on sites in Iran curbed optimism over a potential deal to end the war.
S&P 500 futures rose 0.6%, though gains were more modest than Monday, when US markets were shut. Asian shares were up 0.4%, off session highs, as American forces hit missile launch sites in Iran and boats trying to place mines, the US Central Command said. Authorities described the attacks as defensive in nature.
Weighing on risk appetite was a rebound in oil prices after the strikes clouded the outlook for an interim deal to reopen the vital Strait of Hormuz. Brent rose 2.4% to $98.45 a barrel, bouncing back from Monday’s slump of more than 7%.
The dollar strengthened against all of its Group-of-10 peers, while gold erased earlier gains to fall 0.7% to about $4,535 an ounce. Treasuries rallied across the curve in a catch-up move as cash trading resumed after a break.
“The market is going to be cautious, given how previous hopes for a deal were dashed,” said Abbas Keshvani, director of Asia macro strategy at RBC Capital Markets in Singapore. “But progress in the talks could lead to a further reduction in energy prices, inflation expectations, and therefore yields.”
Traders remained cautiously optimistic as the back-and-forth over a potential Middle East deal continued to drive swings across markets, with global stocks hitting a record Monday on bets the worst of the energy shock may be over. Elevated oil prices and inflation concerns have meanwhile fueled speculation the Federal Reserve may keep interest rates higher for longer.
Earlier, US President Donald Trump said that negotiations with Iran over an interim deal to extend their ceasefire and reopen the strait were “proceeding nicely.” Pakistan’s military chief, Asim Munir, the main interlocutor between the warring sides, told China an agreement was “close to being reached.”
“As the US and Iran make progress toward an agreement, the attack is not viewed as an attempt to re-escalate the war, and the overall scenario towards the deal is unlikely to change,” said Yugo Tsuboi, chief strategist at Daiwa Securities.
The ongoing negotiations with Iran will take a few days, US Secretary of State Marco Rubio said.
Key sticking points remain unresolved, however, including the future of Iran’s nuclear program. Its Tasnim news agency reported the draft agreement could still collapse because of US objections to several provisions, including Tehran’s demand that frozen assets be released.
What Bloomberg Strategists Say…
Investors are easing back from the initial optimism that took hold following the US’s latest pivot toward peace over the weekend. Momentum is fading as the timeline for some sort of accord with Iran shifting to “a few days,” from President Trump’s Saturday comments one would be announced shortly.
— Garfield Reynolds, MLIV. For full analysis, click here.
In other geopolitical news, Russian Foreign Minister Sergei Lavrov urged Rubio to evacuate American citizens and diplomats from Kyiv ahead of what Moscow said would be an escalation of strikes on the Ukrainian capital, according to a statement from Russia’s Foreign Ministry on Monday.
Meanwhile, shares in Hong Kong fluctuated as they returned from their holiday.
That’s after Chinese investors rushed to find alternative ways to buy and sell overseas equities after Beijing launched its most forceful crackdown on illicit cross-border stock trading to stem capital outflows.
Corporate News:
Rapid-commerce firm Zepto Ltd. is preparing to publicly file in the first half of June for an initial public offering that may raise up to $1 billion, according to people familiar with the matter. Ferrari NV unveiled its first fully electric car, a five-seat model priced at €550,000 ($640,000) that marks a sharp break from the sports-car maker’s fuel-burning heritage. Chinese semiconductor stocks rose in Hong Kong on optimism over a potential breakthrough in technology by Huawei Technologies Co. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.6% as of 12:09 p.m. Tokyo time Japan’s Topix was little changed Australia’s S&P/ASX 200 fell 0.4% Hong Kong’s Hang Seng rose 0.5% The Shanghai Composite fell 0.9% Euro Stoxx 50 futures fell 0.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1635 The Japanese yen was little changed at 158.93 per dollar The offshore yuan was little changed at 6.7862 per dollar Cryptocurrencies
Bitcoin fell 0.9% to $76,530.37 Ether fell 1.1% to $2,085.03 Bonds
The yield on 10-year Treasuries declined five basis points to 4.51% Australia’s 10-year yield advanced three basis points to 4.91% Commodities
West Texas Intermediate crude fell 5.2% to $91.57 a barrel Spot gold fell 0.7% to $4,536.33 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Toby Alder, Ruth Carson, Masaki Kondo and Momoka Yokoyama.
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