US Stocks Slip Lower on Uncertainty in the Gulf – Nasdaq off 0.8%
Global financial markets remained volatile through the latest session, with price action once again driven by ongoing developments out of the Middle East. Sentiment shifted throughout the day as investors balanced geopolitical uncertainty against macroeconomic expectations, resulting in a mixed but ultimately softer close for risk assets. US equity markets finished in the red across the board, led by continued weakness in the technology sector. The Nasdaq fell 0.84% to close at 21,761, underperforming its peers, while the S&P 500 declined 0.37% to 6,556, and the Dow Jones slipped 0.18% to 46,124. The US dollar edged higher, with the DXY gaining 0.08% to 99.23, supported by a rise in US Treasury yields. Rates moved higher across the curve, with the 2-year yield climbing 3.7 basis points to 3.889%, while the 10-year yield added 1.8 basis points to 4.360%, indicating continued pressure at the front end. Commodity markets remained choppy. Oil prices ultimately diverged, with Brent crude easing 0.14% to $99.80, while WTI crude rallied 4.79% to $92.35, catching up after recent relative underperformance. Gold rebounded strongly, rising 1.55% to $4,475.51, as investors rotated back into safe-haven assets following earlier weakness.
Inflation Data to Set a Benchmark for War Impact
There are two key inflation markers due out in the market today, and even though the numbers are unlikely to have been impacted by the recent conflict in the Middle East, they will both put in place important benchmarks for their respective economies. Australian annual CPI data is expected to remain high at 3.8%, a key factor that pushed the RBA to raise rates this month, whilst the UK’s lower, yet still too high, number is likely to come in around 3.0%. These numbers could provide the basis for longer-term views. Much will still depend on how long the conflict goes on, but although the short-term impact of these numbers may have little effect on the market today, these figures will contribute strongly to central bank thinking. If they remain high, along with more inflationary pressures on both economies expected from the war impact, then we could see a more hawkish skew from both central bank committees.
Inflation Data in Focus, but Geopolitics Likely to Dominate
Looking ahead to today’s trading sessions, there will be a focus on inflation data in the first couple of sessions; however, again, traders are expecting that geopolitical updates are likely to dominate in the short term. The Asian session will see a focus on Australian markets, with the key CPI numbers due out early in the day. Headline month-on-month data is expected to show a 0.1% increase, with the year-on-year expected to remain very ‘sticky’ at 3.8%. It is the UK’s turn early in the European session, with CPI data also scheduled, the year-on-year number also expected to remain high at 3.0%, with the core number at 3.1%. Later in the session, focus will jump across the channel, with comments from ECB President Christine Lagarde due out when she speaks in Frankfurt. The New York session is relatively light, although investors will be paying attention to US Crude Oil Inventory data midway through the day.
