US Markets Fall in Busy Trading Day – Dow off 0.4%
Global markets experienced another volatile session as investors continued to navigate the dual impact of escalating geopolitical tensions in the Middle East and shifting central bank expectations. US equities closed lower across the board, with the Dow Jones falling 0.44% to 46,021, the S&P 500 declining 0.27% to 6,606, and the Nasdaq easing 0.28% to 22,090, as inflation concerns continued to weigh on sentiment. In currency markets, the US dollar came under notable pressure, with the dollar index dropping 1.03% to 99.20, as other currencies rallied after central bank rate holds. Treasury markets were mixed, with the 2-year yield rising 2.1 basis points to 3.794%, while the 10-year yield slipped 1.6 basis points to 4.249%. Energy markets remained highly reactive to developments in the Middle East. Oil prices traded in wide ranges, initially pushing towards fresh annual highs before reversing lower. Brent crude ultimately settled down 1.19% at $107.94, while WTI fell 0.98% to $96.14, as optimism around the possible reopening of the Strait of Hormuz helped ease immediate supply concerns despite ongoing attacks on regional energy infrastructure. Gold was again a notable mover, coming under heavy selling pressure despite the weaker dollar. The precious metal dropped 3.52% to $4,648.23, its lowest level since early February.
FX Markets Lively After Central Bank Updates
The euro and Japanese yen advanced against the U.S. dollar on Thursday following key central bank announcements that kept interest rates steady amid inflation concerns from rising oil prices and the ongoing Middle East conflict. Central banks are looking closely at the potential inflation effects of the war, and currencies rallied on the back of potential rate moves. The European Central Bank left interest rates unchanged as expected but signalled it was closely monitoring growth and inflation risks, helping the euro climb 1.18% to $1.1585. Meanwhile, the Bank of Japan maintained its current policy stance while keeping a bias toward tighter monetary conditions, pushing the yen up 1.4% to 157.61 per dollar. The Bank of England also voted unanimously to hold borrowing costs steady in light of inflation risks, lifting sterling 1.4% to $1.3436. The U.S. dollar index fell 1% to 99.20, reflecting broad dollar weakness as investors digested the cautious guidance from major central banks. Traders are expecting more moves in the final trading sessions of the week today, as the market continues to digest yesterday’s updates.
Quieter Calendar Day to Close out Trading Week
Looking ahead, the economic calendar is relatively quiet; however, despite the lighter data schedule, market volatility is expected to remain elevated as geopolitical developments continue to drive sentiment across asset classes. The Asian session has little on the event calendar scheduled today, and liquidity may be reduced, with Japanese markets closed for Vernal Equinox Day. Chinese Loan Prime Rates are expected to remain at 3.00% and 3.50% respectively for the 1-year and 5-year tenures, so impact will probably be minimal on the release. The European session is also light on data; however, markets are expected to remain lively as traders continue to evaluate yesterday’s rate updates from the BOE, SNB, and ECB. The New York session will see an initial focus on Canadian markets, with Retail Sales (exp +1.4% m/m) and Core Retail Sales (exp +1.2% m/m) numbers being released before attention moves swiftly back to the newswires for geopolitical updates.
