Market wrap: The US Strikes Iran, Oil hits the markets

Fragile market sentiment was shaken by another wave of kinetic escalation in the Persian Gulf. Iran struck two additional cargo ships yesterday, while overnight from Tuesday to Wednesday the US carried out a series of strikes on targets in Iran.

In the background, the bond market continues to sell off. US 10-year Treasury yields have reached 4.8%. In Europe, French 10-year yields have moved above 4.75%, Germany’s to 3.34%, and UK 10-year gilts are yielding more than 5.2%.

Equity indices have reacted calmly to geopolitical and market tensions. Across major European indices, small gains still dominate. Spain and Poland are leading the move higher; SPA35 and W20 futures are up by about 0.45% and about 0.6%, respectively.

Company news

• Nokia (NOKIA.FI): The telecom company will return to the Euro Stoxx 50 index, replacing the Dutch company Wolters Kluwer.
• Pearson (PSON.UK): The education company is down about 2% despite a strong earnings release and positive recommendations from investment banks.
• BP (BP.UK): Despite expensive oil, the company is giving back initial gains after the appointment of Ian Tyler as chairman.
• Lottomatica: The Italian operator of sports betting and gaming platforms is down about 10% after announcing the acquisition of the Spanish company Cirsa.

Macroeconomic data

• Key macro releases are mostly limited to US data.
  • Before the market opens, investors will see the ADP report. The market expects the reading to rise to 48k from 44k.
  • Half an hour after the open, durable goods orders data will be released. The market expects growth to accelerate to about 1.1% from 0.5% last month.
  • One hour after the open, data on changes in crude oil and distillate inventories will be published. The market expects a decline of more than 1 million barrels across the board.

Commodities

• A broad sell-off is visible in agricultural commodities. A mix of inflation concerns, interest rates, and profit-taking is pushing prices lower. Cocoa futures are down about 5%, while coffee, wheat, and cotton are down about 2%.
• Oil is slightly off its local peak, holding around USD 94. European gas has meanwhile moved above EUR 72.

Forex

• In FX, a sharp drop in the New Zealand dollar stands out, driven by a strong Australian GDP release. NZDUSD is down more than 1%. The yen is posting a moderate gain, which may reflect pricing of another intervention or an adjustment in monetary policy. The yen is limiting gains versus major currencies to about 0.2% to 0.4%.

Crypto

• Worsening risk sentiment is putting moderate pressure on cryptocurrencies.
  • Bitcoin is down about 0.5%, while Ethereum and Solana are down about 1.4%.