Stocks Waver as Iran Deadlock Lifts Oil and Yields: Markets Wrap
(Bloomberg) — Stocks fluctuated while oil prices and bond yields advanced after the US and Iran failed to agree on terms to end the war in the Middle East.
S&P 500 futures were little changed after the benchmark closed at an all-time high on Friday. Brent advanced 2% to more than $103 a barrel as the Strait of Hormuz remained shut. Prices rose as optimism that the US and Iran would reopen the waterway got dashed after President Donald Trump deemed Tehran’s latest proposals “totally unacceptable.”
Bond yields climbed across the world as the standoff amplified fears of an oil-driven inflation shock and expectations of central banks tightening monetary policy. The 10-year Treasury rate rose three basis points to 4.38%. The dollar edged 0.1% higher, while gold slipped below $4,700 an ounce.
Global equities are trading at record highs following a narrow tech-led rally that’s been driven by strong earnings and resurgent optimism around artificial intelligence, even as the war continues. This week, investors will be watching Trump’s visit to China’s Xi Jinping to see whether they can influence the situation surrounding the conflict.
The high in stock markets “does make sense,” Grace Peters, global head of investment strategy at JPMorgan Private Bank, told Bloomberg TV. “The underlying driver is more capex being spent. That’s not just associated with the AI buildout, but governments directing capital and companies following suit.”
Technology stocks led gains in Asia after US semiconductor shares rallied more than 5% on Friday. South Korea’s Kospi index advanced 4.3% to notch a fifth successive record high. European stocks fluctuated.
What Bloomberg Strategists Say:
“Global equities are performing much better than you would expect. If anything it’s a good indication of the underlying strength in stocks that will presumably be even more evident if the firmer contours of a deal emerge later this week. The Trump-Xi talks still scheduled for Thursday and Friday could serve as a catalyst. ”
— Conor Cooper, Macro Squawk. Click here to read the full analysis.
In the UK, gilts underperformed as Prime Minister Keir Starmer battled to save his premiership after Labour’s sweeping defeat in last week’s local elections. Punters on the Polymarket prediction platform added to bets that Starmer would be forced to leave, giving a 65% chance of the premier exiting by Dec. 31.
The yield on 10-year gilts rose seven basis points to 4.98%. The pound fell 0.2% against the dollar.
“Our base case currently is one of managed exit, where Starmer would set a timeline for another person to take over before the next elections,” wrote Jefferies strategist Mohit Kumar. “We have had a negative view on the UK long end and the currency and are not changing our view.”
Investors are also eyeing Tuesday’s inflation report for April to gauge how long a Federal Reserve under Kevin Warsh can afford to hold interest rates steady.
Economists see a sharp 0.6% increase in the consumer price index for the month, based on the Bloomberg survey median estimate. That’s on the heels of March’s biggest monthly advance since 2022.
Since the Middle East conflict began in late February, traders have not only priced out Fed rate cuts but also begun to wager that Warsh, Trump’s pick to replace Jerome Powell when his tenure ends this week, may need to raise borrowing costs next year.
“The market melt-up driven by robust earnings, AI enthusiasm and hopes for a short-lived energy shock faces a tougher test in the week ahead,” said Laura Cooper, global investment strategist and head of macro credit at Nuveen. “Hotter US inflation could push yields higher, while weaker retail sales may begin to reveal the impact of higher gas prices on consumers.”
Corporate News:
SoftBank Group Corp. founder Masayoshi Son has held talks about unveiling an ambitious French AI data center project with President Emmanuel Macron in the coming weeks, according to people familiar with the matter. Amazon.com Inc. is preparing to issue Swiss franc bonds for the first time, as Big Tech hyperscalers turn to new debt markets to fund artificial intelligence spending. Alphabet Inc. is planning to issue yen bonds for the first time in a move that may help fund investments as artificial intelligence competition intensifies. Prosus NV is selling a 5% stake in Delivery Hero SE to Aspex Management, according to an e-mailed statement on Monday. Japan’s JX Advanced Metals Corp. plans to sell ¥250 billion ($1.6 billion) of convertible bonds, the Nikkei newspaper reported. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:32 a.m. New York time Nasdaq 100 futures were little changed Futures on the Dow Jones Industrial Average were little changed The Stoxx Europe 600 was little changed The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1770 The British pound fell 0.2% to $1.3610 The Japanese yen fell 0.3% to 157.09 per dollar Cryptocurrencies
Bitcoin rose 0.8% to $81,324.32 Ether rose 0.4% to $2,337.68 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.38% Germany’s 10-year yield advanced two basis points to 3.03% Britain’s 10-year yield advanced seven basis points to 4.98% Commodities
West Texas Intermediate crude rose 1.5% to $96.89 a barrel Spot gold fell 0.4% to $4,694.17 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Olivia Levieux.
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