US Stock Indices Bounce Back on Peace Hopes – Nasdaq up 1.3%
US equity markets advanced solidly, brushing aside ongoing concerns surrounding the Middle East conflict after reports suggested Iran may be prepared to reopen negotiations with the United States. The improvement in sentiment saw the Dow rise 0.49% to close at 48,739, while the S&P 500 gained 0.78% to finish at 6,869. Technology stocks outperformed, lifting the Nasdaq 1.29% to 22,807. In currency markets, the DXY eased 0.27% to 98.80, surrendering some of its recent strength as risk appetite improved. US Treasury yields continued to push higher after stronger US data, with the 2-year yield rising 3.9 basis points to 3.548% and the 10-year yield climbing 3.6 basis points to 4.096%, suggesting bond markets remain cautious on inflation and broader macro risks. Commodity markets reflected more caution on the conflict in the Middle East. Brent advanced 1.40% to $82.54 per barrel, while WTI gained 1.84% to $75.95, with both benchmarks trading at their highest levels in over a year as traders continued to price in the prospect of a prolonged conflict. Gold also rebounded strongly, rising 1.03% to $5,138.93, recovering from the previous session’s decline as investors maintained exposure to safe-haven assets.
US Data Comes Back into Focus
It has been a week dominated by geopolitical concerns based on the huge escalation in the conflict in the Middle East that has rocked markets. However, experienced traders are aware that while chaos is hitting markets, and there has been plenty of it this week, not all of it making much sense to traditional haven markets, they still need to take note of fundamental updates that will reemerge once geopolitical concerns recede. The first week of the month always has a strong focus on US data and on employment numbers in particular, and traders will have noted — but not necessarily reacted to — the fact that most major US data has come in stronger than expected this week. ISM Manufacturing and Service PMI numbers both beat expectations by big margins, and last night’s ADP Non-Farms also came in stronger than expected. We have seen good strength in the dollar this week, as well as consistently rising US Treasury yields, and while most of these moves can be attributed to haven and inflation plays due to the Middle East conflict, the underlying fundamentals could also see both supported if the conflict calms, especially if Friday’s Non-Farms backs up the rest of this week’s data.
Geopolitical Updates Remain the Key Driver for Markets Today
Looking ahead to the coming sessions, today’s macroeconomic calendar is relatively light. However, markets are likely to remain sensitive to geopolitical headlines, which will continue to drive volatility across asset classes throughout the day. In addition to the continuing conflict in the Middle East, traders are expecting more volatility on trade and tariff updates out of the US. There are some events on the calendar that should also add some volatility to the mix. There is little of note in the Asian session; however, the release of the ECB Monetary Policy Meeting Accounts during the European session will be closely analysed by euro traders. Then we have the second major US employment update of the week close to the New York open, with the US Weekly Unemployment Claims data (exp. 215k), while later in the session there will be a focus on central bank updates, with remarks from ECB President Christine Lagarde scheduled, as well as Fed members Michelle Bowman and Austan Goolsbee.
