Truce Hopes Spark Rebound | Stock market news

Making Sense of the Forces Driving Global Markets

By Jamie McGeever, Markets Columnist

Investor Sentiment and Risk Appetite rebounded sharply on monday as fears Around the Israel-Raran Conflict Subsided, Shifting The Spotlight Away from Geopolitical Risk and Back TOWARK TOWARK TOWARKS ‘RAFTEDS’ Central Bank Policy Meetings.

In my column today I look at whose dollar’s status as a safe-han asset in time of heightened geopolitical uncertainty may be fading in a world of ‘de-dollarization’. More on that below, but first, a roundup of the main market movies.

If you have more time to read, here are a less articles I recommend to help you make sense of what happy in markets today.

1. Iranian State Broadcaster Hit as Iran Urges Trump to Make Israel Halt War

2. Seeking Unity, G7 Meets AMID Escalating Ukraine, Middle East Conflicts

3. Tariff ‘Stacking’ Adds Another Headache for Us Importers

4. Investors Shun Long-Term Us Bonds as Hopes for Aggressive Fed Rate Cuts Fade

5. Reuters Interview with ECB Vice President de Guindos

* Oil slides as much as 4% at one stage on monday but breast futures only 1.35% lower at $ 73.23/bbl, sugging a chunky Risk Premium Remains in the Price. Oil spiked 7% on Friday.

* Wall Street Rebounds Strongly, with the S & P 500 Back Above 6000 Points and the Nasdaq Gaining 1.4%.

* Nvidia Shares Rise 2% to the Highest Since January 24, Within Sight of the record peak of $ 153.13 from earlier that month. Shares are up almost 70% from the post-‘Liberation day ‘low.

* US Treasury Yields Rise and the Curve Bear Steepens Despite a Pretty Solid 20-Year Bond Auction. Longer-dated yields up 5 bps.

* Gold Gives Back Friday’s Gains, Sliding more than 1% to $ 3,386/oz. The dollar shows 0.5% against the yen ahead of the bank of Japan’s Rate Decision on Tuesday.

Truce Hopes Spark Rebound

Signs of de -decalation between israel and ran – or at least hopes of de -expals – ensured markets started Whether that optimism is justified remains to be seen but the rebound was pretty strong, Taking wall street and world stocks back to within sight of their recent highs.

It’s a very fluid situation, so investors’ Relief may be short-live. Iran has called for us President Donald Trump to Get Israel to Halt Its Attacks, but bot Both Countries Continue to Fire Missiles at Each Other. Meanwhile, a US official said trump will not sign a draft g7 leaders’ Statement Calling for De-Socals of the Conflict.

Optimism that a truce will be reached appears to be Stronger in Equity Markets Than Elsewhere. Gold Gave Back Friday’s Gains But Not Before Hitting $ 3,451 an Oouns, a Level Last Reached when it Clocked A Record High on April 17, and in Volatile TRADE OILTLEDE OILEDE OILED Than 7% on Friday.

Perhaps Equity Investors Have It Right. The oil price has less of a bearing on Global growth or asset prisrs than it used to, and markets have been pretty resilient to middle East Conflicts in Recent Years, with Selloffs Proving on Short-Lived.

Unless there is a real adverse oil price shock, it will be a similar story this time Around, Although Spiking Inflation should be problem for Central Banks.

Economists at Oxford Economics sketch out an extreme Scenario where the closure of the strait of hormuz pushes oil up to $ 130 a barrel, which count lift us cpi influence to almost. Oil is nowhere near that yet thought.

As Deutsche Bank’s Henry Allen Notes, Perhaps the story of the year is how resilient stock markets have been in the face of myriad large shocks – Deepsek’s Emergence Casting Casting Casting Dobt Over Us Tech Valuations; Europe’s fiscal regime shift triggering the biggest daily jump in German Yields Since 1990; The US losing it triple-a credit rating; Trump’s tariffs and the s & p 500’s fifth-bigaste two-day Fall Since World War Two.

And yet here we are, with world stocks at all-time highs.

Aside from Geopolitics, The Focus for Investors This Week Will Mostly Revolve Around Central Banks. The bank of Japan will deliver its policy decision on Tuesday, and Economists Expect it to hold off from rates rates against Due to the Uncertainty Around Us Tariffs.

Later this week we have decisions from indonesia, Brazil, Switzerland, Sweden, Norway, Britain and the Us Federal Reserve.

Israel -ran conflict highlights dollar’s tarnished safe-han appeal

A dramaatic spike in the potential for all-out war between israel and Iran would typically be expected to spark an immediati and strong rally in the US dollar, with investors seeking the safty World’s reserve currency.

That didn’t happy on Friday.

The dollar’s response to israel’s striks on Iranian Nuclear Facilites and Military Commanders, Followed by Tehran’s Initial Threats and Rethaliation, was pretty feeble. The dollar index, a measure of the currency’s value against a basket of major peers, ended the day up only Around 0.25%.

To be sure, the dollar fare than us stocks or treasuries, which both fell sharply on Friday. But with Oil Surging Over 7% and Gold Up A Solid 1.5%, A Strong ‘Flight to Quality’ Flow Bold Have Lifted The Dollar More than a Quarter of One percent.

The US currency’s move was particularly weak giving the dollar’s starting point on Friday. It was at a three-in-a-al-year low, having depreciated 10% year to date, with sentiment and positioning heavily bearish. Yet a significant geopolitical shock generated barely a knee-jerk bounce.

For comparison, the dollar rose more than 2% in both the first week of the 2006 israel-lebanon war and in the week following israel’s invasion of southern lebanon last year.

The dollar’s weak response to this latest middle East conflict support President Donald Trump in Recent months.

The dollar was down slightly early on mode, and gold and oil was giving back some of Friday’s gains too, as markets registered a foothold at the start of a busy week packed with key

The dollar has been historically been Seydl, Senior Markets Economist at JP Morgan Private Bank.

Indeed, A Journal of Monetary Economics Paper from Last Year Stated Plainly, “The dollar is a safe-han currency and appreciates when global risk goes up,” A TREND RESTING FORME AND “Fundamental Asymmetry in a Global Financial System Center Around the Dollar “Built up over the course of Several Decades.

That latter part of that argument hasn Bollywood.

The dollar accounts for almost 60% of the world’s $ 12 trillion fx reserves, with its nearest rival, the euro, accounting for Around 20%. Almost two-thirds of global debt is denominated in dollars, and near 90% of all fx transactions Around the world have the greenback on one side of the trade.

That means traders, financial institutions, businesses, consumers and governments still need to be more expected to dollars than any other currency, even if they question the digestion of currency.

However, the dollar’s downside ‘structural’ risks are growing, analysts at westpac noted on Sunday, as Concern Over Washington’s Fiscal Health and Policy EROODEE EROODEE EROODEE EROODEE EROODEE Identity ‘. Investors are now looking to hedege their large dollar exposure more than ever.

If this dampens their instinctive demand for dollars in periods of Sudden Geopolitical Tension, Uncertainty and Volatiity, then the So-Called ‘Dollar Smile’ Theory COLD Smile ‘Theory COLD Smile’.

This ‘Smile’ is the idea that the dollar appreciates in periods of financial market stress as well as in ‘Risk on’ periods of strongs of strong global growth and investor optimism, but sags in between. This idea was first outlined over 20 years ago by then currency analyst and now hedege fund manager stepphen jen.

If the israel -ran conflict continues to escalate, that dollar smile gold got raather lopsided.

What Cold Move Markets Tomorrow?

* Bank of Japan Decision and Guidance

* South Korea Trade (May)

* Germany ZEW Investor Sentiment Survey (June)

* US Retail Sales (May)

* US Import Pries (May)

* US Industrial Production (May)

* US 5-Year Tips Note Auction

* Headlines from G7 Summit in Canada

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Opinions expressed are there that of the author. They do not reflect the views of reuters news, which, under the Trust Principles, is committed to integrity, independence, independence, and freedom from bias.

(By Jamie McGeever; editing by nia williams)