(April 2): Stocks and bonds fell as oil surged anew on Thursday, with US President Donald Trump dashing optimism that the war in the Middle East is nearing a swift resolution and that disruptions to energy flows will ease.
Nasdaq 100 contracts slumped 1.9% amid a pre-market sell-off in Big Tech stocks and chipmakers. S&P 500 futures dropped 1.5%. West Texas Intermediate jumped 11% to more than US$111 ($142.87) a barrel after Trump used a prime-time address to pledge more aggressive action against Iran and offered no concrete plans to reopen the Strait of Hormuz. European diesel futures hit US$200 a barrel.
Bonds tumbled as expectations that oil prices will stay higher for longer prompted traders to initiate fresh bets on tighter monetary policy. The dollar advanced the most in a week while gold snapped a four-day streak of gains.
“This market just isn’t manageable,” said Laurent Lamagnere, the deputy chief executive officer of Alphavalue in Paris. “We’re really concerned about second-round effects, not only on oil prices but also on oil supply, for example, airlines trimming destinations with harsh consequences for tourism.”
Optimism had been building for days that Trump was seeking a quick off-ramp to the war. Instead, his Wednesday speech offered no clear timeline or breakthroughs on ending the conflict, which has already roiled financial markets and pushed some equity gauges into correction territory.
See also: Asia shares gain as volatile week draws to a close
Oil “has rarely dipped below US$100 per barrel since its initial surge”, said Russ Mould, an investment director of AJ Bell. “This may be a better indicator of where we are than the latest movements in global indices, as the world is forced to confront a situation where around 20% of the world’s supply is disrupted.”
Shares in oil and gas companies such as Venture Global Inc and Exxon Mobil Corp rebounded in US pre-market trading. Travel and mining and semiconductor stocks fell. Nvidia Corp slumped 2.7%. Blue Owl Capital Inc limited redemptions from two of its private credit funds after facing a surge in withdrawal requests.
Ahead of Friday’s March payrolls report, jobs data on Thursday gave mixed signals on the labour market. A report from Challenger, Gray & Christmas Inc showed a 25% increase in job-cut announcements in March from the previous month. Meanwhile, initial jobless claims unexpectedly fell in the week through March 28.
See also: World stocks and bonds charge higher as oil slides
Treasury yields rose across the curve, with the two-year rate up three basis points to 3.83% as traders cut the odds of a 2026 US Federal Reserve rate cut to about 15% from more than 20%. Money markets again fully price in two quarter-point hikes by the Bank of England and three by the European Central Bank (ECB) for the year.
Damage caused by the war will continue to have a negative impact on the global economy even if hostilities end soon, ECB Governing Council member Fabio Panetta said.
Traders are likely to trim their stock holdings ahead of the long weekend, with many markets closed for as long as four days. Since the conflict began, the S&P 500 has posted cumulative gains over the first three days of the week but cratered 9%, all told, on Thursdays and Fridays.
For Mabrouk Chetouane, the global head of market strategies at Natixis IM Solutions, there is little sense in buying protection or hedging positions ahead of the break as events could go either way.
“The outcome is completely binary, it’s 50/50 between escalation and de-escalation,” Chetouane said. “The best choice is just to keep a cool head and maintain our allocation, it’s the most reasonable thing to do.”
Corporate news:
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- Estée Lauder Cos and Spain’s Puig Brands SA are advancing in negotiations to combine, people familiar with the matter said.
- One of Europe’s biggest airline groups kicked off the race for TAP SA, with Air France-KLM submitting the first known bid for a stake in the Portuguese flag carrier.
- Alibaba Group Holding Ltd has released its third proprietary artificial intelligence (AI) model in as many days, reinforcing the company’s intent to focus on profiting off its flagship AI services.
- Stellantis NV is discussing options for building electric vehicles in Canada with its Chinese partner, Zhejiang Leapmotor Technology Co, according to people familiar with the matter.
Some of the main moves in markets:
Stocks
- S&P 500 futures were 1.5% lower as of 8.41am New York time on Thursday
- Nasdaq 100 futures fell 1.9%
- Futures on the Dow Jones Industrial Average fell 1.4%
- The Stoxx Europe 600 fell 1.4%
- The MSCI World Index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.5% to US$1.1526
- The British pound fell 0.7% to US$1.3213
- The Japanese yen fell 0.5% to 159.62 per dollar
Cryptocurrencies
- Bitcoin fell 2.9% to US$66,183.38
- Ether fell 5.3% to US$2,030.45
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.35%
- Germany’s 10-year yield advanced six basis points to 3.05%
- Britain’s 10-year yield advanced nine basis points to 4.92%
Commodities
- West Texas Intermediate crude rose 11% to US$111.28 a barrel
- Spot gold fell 2.9% to US$4,620.88 an ounce
Uploaded by Tham Yek Lee
