Headlines:
- A softer risk mood to start the new week but the feeling is that it could've been worse
- US president Trump reaffirms blockade on Iranian ports starting from later today
- Iran: No security for Persian Gulf ports if own is threatened
- Oil prices surge after US-Iran talks collapse over the weekend
- Oil prices jump back above $100 after US-Iran negotiations breakdown, Trump's blockade
- Gold prices come under pressure after the first round of US-Iran talks fail. What's next?
- Rate hike bets increase after the failed US-Iran talks as energy prices remain elevated
- ECB's Vujcic: Energy prices still very close to baseline scenario
- BOJ governor Ueda: Underlying inflation gradually accelerating towards target
- China new bank loans slow further in the first quarter this year
Markets:
- WTI crude up 8% to $104.10
- US dollar a little higher across the board
- Major indices in Europe lower by 0.7% to 1.0%; S&P 500 futures down 0.6% on the day
- Gold down 0.8% to $4,708
- US 10-year yields up 4 bps to 4.35%
- Bitcoin down 0.6% to $70,957
There was much optimism last week riding on US-Iran negotiations over the weekend but it all came crashing down as the talks in Islamabad fell apart. Still, the feeling and reaction in markets today is that it could've been much worse.
We are seeing the expected reaction in that oil prices are surging higher while risk trades drop lower. However, the magnitude of the moves feel rather controlled - in the sense that market players are still holding out some room for optimism. That even as the US announces that it will form its own blockade on Iranian ports starting today, which will make it tough to see negotiations enter a second round.
WTI crude opened with a gap higher and is up over 8% to above $104 currently, but never really extended gains all too much.
Meanwhile, equities are down but the losses are rather contained with S&P 500 futures lower by just 0.7%. In Europe, major indices are down by around 0.7% to 1.0% mostly so the look and feel is not that bad all things considered.
That being said, it is still early in the day/week and oil prices could be in for a reckoning with the May futures set to expire next week. That could induce massive volatility spikes in the coming days especially if US-Iran developments fail to impress. In turn, that will spread out to broader market moves too.
In FX, the dollar is leading the way as it bounces back a little from the losses last week. USD/JPY is up 0.3% to 159.80 while EUR/USD is down 0.3% to 1.1690 on the day. Meanwhile, AUD/USD is down 0.3% to 0.7035 but well off lows of around 0.6985 earlier in the day.
Elsewhere, we're seeing bond yields creep back up as well with 10-year Treasury yields up by 4 bps to 4.35%. And in the commodities space, precious metals are dipping with gold down 0.8% to $4,708 and silver down 2.5% to $74.02 on the day.
It is still all about headline risks and US-Iran developments as we get into the new week.
