Headlines:
- Trump demands allies to help on Strait of Hormuz but here’s why it won’t work
- UAE’s Fujairah oil port attacked again, oil loading has been suspended
- US, Japan top diplomats set for phone conversation later today – report
- US futures hold slightly higher for now but danger lurks just around the corner
- USDJPY trades around intervention levels as Japanese officials remain constrained
- China reaffirms that they are in communication with US on Trump’s visit
Markets:
- WTI crude oil down 1.5% to $97.30, Brent crude oil down 0.2% to $103.20
- US dollar lower across the board as risk sentiment improves
- European indices slightly higher, S&P 500 futures up 0.7% on the day
- US 10-year yields down 3 bps to 4.25%
- Gold down 0.1% to $5,017, Silver down 1.5% to $79.31
- Bitcoin up 2.5% to $73,630
The market mood early this week seems to be one that hints that it is ready to move on. However, it could be a false dawn with traders and investors underpricing the risks of prolonged disruption in the Middle East. Trump’s call for aid on the Strait of Hormuz was rejected by close allies in not wanting to be involved and even so, US escorts alone won’t do much to see the passageway become fully operational again.
Still, broader market sentiment shows some relief for now in hopes that the tide might turn sooner rather than later. European indices are holding marginal gains on the day while US futures are sitting higher as tech shares lead the way. That comes as oil prices cool off a little from the highs, with WTI crude oil dropping off from $102 in Asia to just above $97 now.
In the major currencies space, the dollar struggled across the board as such. EUR/USD picked itself up from 1.1420 to 1.1475 currently, up 0.5% on the day. Meanwhile, USD/JPY backed off from early highs of 159.75 to 159.20 as intervention risks from Tokyo loom large. And we also saw AUD/USD climb by 1% to 0.7050 amid the improvement of the risk mood.
In other markets, precious metals are sitting slightly lower with gold down 0.1% to $5,017 but off earlier lows of $4,968 during the session. As for bonds, 10-year Treasury yields are seen easing slightly – down 3 bps to 4.25% on the day.
It’s all just a slight breather to last week’s action with a light dash of hopeful optimism perhaps. But considering the situation on the ground, there is the danger of it all falling apart again on one negative headline. So, just be mindful of that.
This article was written by Justin Low at investinglive.com.
