Haven supply disintegrates as Iranian strikes are contained: Markets wrap

(Bloomberg) — U.S. stock futures trimmed losses and demand for safe-haven assets collapsed after Iranian media appeared to downplay the impact of Israeli strikes.

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Oil turned lower, erasing the previous sharp jump that took the price of Brent crude above $90 per barrel. Treasury yields recovered much of an early move that sent the yield on the 10-year Treasury note down 14 basis points after Israel launched a retaliatory attack on Iran less than a week after Tehran launched a barrage of missiles and drones, according to U.S. officials. An Iranian military official indicated that Tehran does not feel compelled to respond to the explosions, which American officials say were caused by Israeli strikes.

Futures on the S&P 500 fell 0.2%, while Nasdaq 100 futures fell 0.3%, both measuring far from session lows. The dollar achieved modest gains.

“These events usually end up being less disruptive than we feared they would be,” Nathan Sheets, global chief economist at Citigroup, said in an interview with Bloomberg TV.

The latest moves cap a bleak week for markets after strong economic readings and a hawkish Fed policy forced investors to review the timing of a highly anticipated pivot to easier policy and the size of potential interest rate cuts. The S&P 500 is now tracking its biggest weekly decline since October.

New York Fed President John Williams said that while this is not his base forecast, a rate hike is possible if warranted. His counterpart in Atlanta, Rafael Bostic, said he did not think it would be appropriate to ease until the end of 2024. Minneapolis Fed President Neal Kashkari told Fox News that the Fed may keep interest rates steady throughout the year.

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“With inflation persisting, central banks have no option to consider spikes in oil prices, should they occur,” said Rajeev de Mello, global macro portfolio manager at GAMA Asset Management. “They will have to go back to higher interest rates for a longer period of time which at this point will be a shock to all markets.”

Despite Friday's moves to allay fears of a broader war in the Middle East, the events are worrying and will deter investors from making bold bets, according to Michael Brown, a strategist at Pepperstone Group Ltd. in London.

“No one will want a shortage of crude oil and havens before the weekend,” he said. “From a risk management perspective, you can't definitively say that geopolitical risks are over and done with. So we may see another bout of risk reduction. Ultimately, it's about people's reluctance to have too much exposure.”

The most prominent features of the company:

  • Paramount Global shares jumped as Apollo Global Management Inc. and Sony Group Corp. are considering a joint bid for the media company.

  • Netflix Inc. shares fell. In pre-market trading after the live video streaming company reported results that included a pessimistic outlook for second-quarter revenue.

  • Infosys Ltd. expects tepid sales growth for this year, a sign that overseas customers are curbing spending on technology until the global economy accelerates.

  • Shares of American Express rose in premarket trading after first-quarter revenue beat estimates as consumers continued to flock to the company's premium credit card offerings.

  • L'Oréal SA stock rose on Friday after reporting better-than-expected first-quarter sales as strength in Europe and North America helped offset a slowdown in shopping by Chinese travelers.

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Main events this week:

  • Bank of England Deputy Governor Dave Ramsden and European Central Bank Governing Council member Joachim Nagel speak on Friday

  • Chicago Fed President Austin Goolsbee speaks Friday

Some key movements in the markets:

Stores

  • S&P 500 futures were down 0.2% as of 7:38 a.m. New York time.

  • Nasdaq 100 futures fell 0.3%

  • Dow Jones Industrial Average futures fell 0.1%

  • The Stoxx Europe 600 index fell by 0.4%.

  • MSCI World Index fell 0.3%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%.

  • There was little change in the euro at $1.0649

  • There was little change in the pound sterling at $1.2434

  • There was little change in the Japanese yen at 154.59 to the dollar

Digital currencies

  • Bitcoin rose 2.5% to $65,132.2

  • Ethereum rose 1.2% to $3,105.49

Bonds

  • The yield on the 10-year Treasury note fell four basis points to 4.59%.

  • The yield on 10-year German bonds fell two basis points to 2.47%.

  • The yield on British 10-year bonds fell by three basis points to 4.25%.

Goods

This story was produced with assistance from Bloomberg Automation.

– With assistance from Sujata Rao, Farah Al-Bahrawi, and Sagarika Jaisinghani.

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