(March 10): Oil tumbled in early trading after US President Donald Trump signalled the Iran war could be ending soon, while Asian equities were set to climb after a bullish end to Monday’s session on Wall Street.
Equity index futures for Australia, Japan, South Korea and Hong Kong all climbed after the S&P 500 index rose 0.8% on Monday, reversing intraday losses. West Texas Intermediate crude dropped as much as 10%. Ten-year Treasury yields halted a five-day increase and the dollar weakened.
The optimistic shift was triggered by Trump’s comments in a CBS interview that the conflict is “very complete, pretty much” and the military operation is “very far” ahead of its initial four- to five-week time frame.
The whipsaw session underscored how exposed markets remain to every development in the Middle East conflict, with a single headline enough to reverse billions of dollars in losses. Volatility shows no signs of letting up as investors weigh a fast-shifting geopolitical conflict with no clear trading playbook.
“We expect markets to stay very short-term focused, volatile and headline-driven as the conflict plays out this week,” said Carol Schleif at BMO Private Wealth.
A wild ride in energy markets continued on Monday, with oil rocked by intense prices swings as traders parsed through all the moves in Iran and the impacts on global supplies.
See also: Trump says war will resolve ‘very soon’, lifting oil sanctions
Group of Seven finance ministers said they were ready to take any steps needed to support energy supply, including releasing strategic oil reserves — although the group isn’t at the point of doing so yet. Meantime, Trump is expected to review a set of options to tame oil prices, including restricting US exports and waiving some federal taxes, Reuters reported.
In Asia, data set for release on Tuesday includes industrial production in Malaysia, machine tool orders for Japan, and China trade.
There’s a “push/pull” between the real-world issues causing higher oil prices, inflation and growth fears versus the undercurrent of Fomo (fear of missing out) that keeps an underlying bid in stocks, according to Steve Sosnick at Interactive Brokers.
See also: Iran conflict could boost LNG trade through Panama canal
“Fomo is labelled as fear, but it’s really greed, and I would assert that there is still plenty of greed out there relative to fear,” he added.
Still, US stocks are facing a growing risk of a sharp rout this year, said Ed Yardeni, who updated his outlook for what he describes as “fast-moving times”. The founder of Yardeni Research raised the probability of a meltdown to 35% for the rest of the year, up from 20%. He also slashed the odds of a melt-up — a rally driven more by investor enthusiasm than underlying fundamentals — to just 5% from 20%.
Uploaded by Isabelle Francis
