By Rae Wee
SINGAPORE (Reuters) – Gold prices rose on Monday, attracting some safe-haven bids, while oil prices were volatile after Iran’s retaliation against Israel at the weekend, fueling fears of a broader regional conflict and keeping traders on edge for what comes next.
U.S. stock futures rose after major indexes ended sharply lower on Friday as results from major U.S. banks were unimpressive. (.NOT)
Iran launched explosive drones and missiles at Israel on Saturday evening in retaliation for an alleged Israeli attack on its consulate in Syria on April 1, marking its first direct attack on Israeli territory.
The threat of open war between the Middle East’s main enemies and drawing in the United States has left the region on edge, as US President Joe Biden warned Prime Minister Benjamin Netanyahu that the United States would not participate to a counter-offensive against Iran.
Israel said “the campaign is not yet over.”
Global markets struggled to find direction early in the day in Asia following weekend developments in the Middle East, as oil prices edged lower in volatile trade, gold jumped and that the dollar remained generally stable. (FRX/)
Brent crude futures fell 0.25% to $90.21 a barrel, while U.S. West Texas Intermediate crude futures fell 0.35% to $85.36 the barrel. (OR)
Gold rose 0.7% to $2,359.92 an ounce, after hitting a record $2,431.29 on Friday. The yellow metal has climbed about 14% for the year so far. (GOL/)
“It all seems pretty well contained,” said Chris Weston, head of research at Pepperstone. “From a very simplistic point of view, Iran’s actions didn’t really surprise anyone, they are entirely consistent with what we assessed at the end of last week.
“What could cause a slight rise in the price of gold… is the idea that we could see another response from Israel, and if that were to happen… that could lead to a reduction in risk (of assets).”
Elsewhere, 10-year US Treasury futures edged lower with an implied yield of 4.53%, while the dollar held near a 34-year high against the yen at 153.27.
The euro and pound sterling were also near five-month lows. (FRX/)
The continued run of resilient U.S. economic data, particularly last week’s higher-than-expected inflation report, has prompted investors to revise their expectations for the pace and depth of rate cuts from the Federal Reserve this year, as inflation proves more persistent than previously thought.
Futures contracts are now pointing to around 50 basis points of easing expected this year, a significant decline from the 160 basis points expected at the start of the year.
This dramatic change in the rate outlook in turn sent the dollar tumbling and U.S. Treasury yields surging, with the two-year yield topping 5% for the first time since November last week. (WE/)
“We have updated our forecast for the US FOMC, pushing back the start of the interest rate cut cycle to September 2024, from July previously,” said Kristina Clifton, senior economist at the Commonwealth Bank of Australia.
“The US CPI was stronger than expected in the first three months of 2024. We expect it will take a run of inflation numbers of 0.2%/month or less to give the Fed confidence that inflation can remain lower for a long time and interest rates do not need to remain at a restrictive level.”
Many Fed policymakers are scheduled to speak this week, including Chairman Jerome Powell, who could provide more details on the future path of U.S. interest rates.
In stock markets, S&P 500 and Nasdaq futures each rose 0.3% in early Asian trading, reversing some of U.S. stocks’ heavy losses on Friday.
All three major indexes posted losses this week, weighed down by weak bank results and changing expectations for Fed policy.
“Ultimately, what we’re seeing right now is the market is really trying to understand what’s going on. Their visibility on price risk in this market has become a little more problematic, and I think that When you do, without that visibility, the volatility is higher. That’s kind of where we are,” Pepperstone’s Weston said.
Bitcoin was down more than 2% at $65,547, after falling below $62,000 on Sunday. The world’s largest cryptocurrency hit a record high last month on flows into new Bitcoin spot exchange-traded funds and expectations of imminent Fed rate cuts. (FTX/)
(Edited by Lincoln Feast.)
