US Markets Mixed Ahead of Weekend – Dow down 0.5%
US markets delivered a mixed performance on Friday as investors remained cautious ahead of key weekend talks between the US and Iran, while inflation data came in broadly in line with elevated expectations. The Dow Jones fell 0.56% to 47,916, while the S&P 500 edged 0.11% lower to 6,816. The Nasdaq outperformed, rising 0.35% to close at 22,902. In fixed income, US Treasury yields moved higher following the CPI release, which reinforced expectations that inflation pressures remain elevated amid ongoing Middle East tensions. The 2-year yield climbed 2.9 basis points to 3.795%, while the 10-year yield rose 4.2 basis points to 4.317%. In FX markets, the US dollar eased slightly, with the dollar index slipping 0.12% to 98.70. Commodities saw further downside, particularly in energy markets. Brent crude fell 0.75% to $95.20 a barrel, while WTI declined 1.33% to $96.57, capping the largest weekly losses since 2022. Gold also edged lower, slipping 0.36% to $4,749.75, continuing to trade within a relatively tight range.
Risk Off Again as Trump Threatens Blockade
Over the weekend, geopolitical developments shifted sentiment strongly. Reports from Islamabad confirmed that US-Iran negotiations failed to reach an agreement, and this has been followed by President Trump threatening to blockade the Strait of Hormuz to stop Iran from charging vessels for safe passage. Markets have seen a sharp drop in risk this morning. FX markets, the first to open, saw gapping on the open as traders scrambled to buy dollars, with the euro opening 40 pips lower and USDJPY swiftly gaining a similar amount, the DXY up 0.45% so far. Oil markets saw sharp moves once futures opened, with both Brent and WTI swiftly gaining 8% as traders repriced more delays in the Strait. Traders are now preparing for more volatility in the sessions ahead, with a clear skew to downside risks; however, this will be another test of Trump’s resolve to see if action is taken after his threats.
Quiet Calendar Day but Volatility to Remain High
Looking ahead, today’s session is expected to be driven primarily by geopolitical headlines given the relatively light economic calendar. The Asian market has already had a lively start on updates from the weekend, and traders are expecting to see more volatility, especially if we see fresh updates out of the US before the end of their day. There will be a strong focus on any replies from the Iranian side of the equation as we progress through the trading day, and again, markets are expecting more updates and therefore more volatility. The London session has little on the calendar to distract traders from the Gulf, and it is a similar story in the New York session, where we will see the release of US Existing Home Sales, with the market expecting a 1.07 mio print. However, again, this is expected to have little short-term impact, and geopolitics are set to dominate the session.
