We keep it shorter today as we continue to observe the Israel-Iran situation. I am also speaking with contacts of mine in the US and Tel-Aviv to get information before reported in the media – if possible.
We see that Wall Street recouped their early losses. Also oil and gold, which initially spiked fell – even below levels before the alleged Israeli strike in Iran – which we see as a market overselling after initially selling the heightened concerns of a further escalation in the Middle East. Iranian media downplayed the impact of the Israeli attacks – both sides generally don't use further escalating language in an attempt to contain the conflict to become a war, with also regional power, as well as Western nation trying to ease the situation from further escalating.
Also Treasury yields reversed much of the initial move that drove the 10-year yield down 14 basis points after Israel launched a retaliatory attack on Iran less than a week after Tehran's missile and drone strikes. An Iranian military official signaled that Tehran did not feel compelled to respond to the blasts, which US officials said were caused by Israeli attacks. Also the USD gave back some of earlier gains although movements have been relatively moderate.
However, the attacks can also not be ignored. A shadow-war has become at least a partially hot conflict with now both sides directly attacking each other. I thus expect concerns to rise again later today and ahead of the weekend with gold likely rising back into the $2,390 – $2,400 range.
Headwinds on Wall Street in recent days came in particular from strong US economic data and hawkish comments from Fed officials – both reduced the market's expectations for rate cuts this year. Minneapolis Fed chief Neel Kashkari said that the Fed may keep rates on hold throughout the year.
While we saw stocks recovering now investors will be discouraged to make bold bets – although strong growth from Netflix in Q1 sets a general positive tone for upcoming US big tech earnings reports – even as Netflix itself is trading lower on a rather disappointing Q2 forecast. Given Netflix' very strong Q1, however, it's likely that the streaming giant will recover some of the pre-market losses.
We also saw oil prices falling back to multi-weeks lows. It's hard to imagine that investors want to old SHORT positions in oil or gold over the weekend given that it can't be ruled out that geopolitical risks are out of the picture now.
