Stocks Rally on War-End Optimism, Oil Falls: Markets Wrap
(Bloomberg) — US stocks rallied for a second day as hopes grew that the war in the Middle East may be nearing a conclusion, while Brent briefly fell below $100 a barrel. Treasuries wavered and the dollar was on track for a second day of declines.
The S&P 500 was up 0.7%, adding to gains from the previous session as investors assessed comments by President Donald Trump on the war’s trajectory. Trump said on Wednesday that Iran has asked for a ceasefire, adding that the US would only consider it if the Strait of Hormuz were reopened. Iran’s foreign ministry said the claim of a ceasefire request was “false and baseless,” according to state TV.
On Tuesday, Trump said he foresaw the US ending the conflict within two to three weeks, sparking a sharp rally in stocks. The US leader will hail his military campaign in Iran as a success during a Wednesday prime-time address and stress that the conclusion of operations may come within that time frame, according to a White House official.
“The violent recovery in the last two days could be either the smart money betting on de-escalation in the Middle East, or it could be a touch of desperation driving fear of missing out on a recovery,” said Michael Bailey, director of research at wealth management firm FBB Capital Partners. However, “any mixed or bad news at these higher levels could drive markets back down.”
The Nasdaq 100 Index was up 1.1%. Brent was down 2.3% at around $101.55 per barrel, paring an earlier loss. The two-year Treasury yield was little changed at 3.79%, following solid data on the US labor market and retail sales.
“The sharp rally in stocks over the past 24 hours demonstrates how a resolution to the conflict, or hopes thereof, may quickly drive markets higher,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “We continue to believe global stock markets will end the year higher than they are today.”
US travel, mining and chips stocks rose, with Sandisk Corp. up around 8%. Miners including AngloGold Ashanti Plc and Newmont Corp. climbed as gold advanced for a fourth day. At the same time, Nike Inc. plunged 14% after a gloomy outlook, while energy shares were weaker.
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.
Some market participants are also wary of a late-week selloff in US stocks, a pattern that has taken hold since the start of the Iran war.
Meanwhile, 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.
“Each passing week increases the global economic costs of the Iran conflict,” wrote Tiffany Wilding, economist at Pacific Investment Management Co. At some point, “the economic effects of persistent disruptions will start to build, with recessionary implications for the global economy.”
Corporate News:
Eli Lilly & Co.’s weight-loss pill won US approval, ratcheting up pressure on Novo Nordisk A/S, which launched an obesity pill earlier this year. 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.
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.7% as of 2:40 p.m. New York time The Nasdaq 100 rose 1.1% The Dow Jones Industrial Average rose 0.6% The MSCI World Index rose 1.4% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.3% to $1.1584 The British pound rose 0.6% to $1.3302 The Japanese yen was little changed at 158.77 per dollar Cryptocurrencies
Bitcoin was little changed at $68,237.38 Ether rose 1.2% to $2,132.3 Bonds
The yield on 10-year Treasuries was little changed at 4.31% Germany’s 10-year yield declined two basis points to 2.99% Britain’s 10-year yield declined nine basis points to 4.83% Commodities
West Texas Intermediate crude fell 1.2% to $100.19 a barrel Spot gold rose 1.9% to $4,755.83 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Julien Ponthus, Subrat Patnaik, Jan-Patrick Barnert, Isabelle Lee and Vildana Hajric.
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