Morning Bid: Nervous Markets Wait for Israel's Response, Fed Outlook - Latest Global News

Morning Bid: Nervous Markets Wait for Israel’s Response, Fed Outlook

A look at the day ahead in Rae Wee’s European and global markets

European stocks are expected to follow Asia’s negative lead on Monday after a weekend marked by news of escalating tensions in the Middle East and fears of a wider regional conflict.

The flight to safety began last week with talk of an Iranian attack on Israel, and after an attack involving around 300 drones and missiles, the focus now turns to Israel’s response. [MKTS/GLOB]

Gold and the U.S. dollar remained steady even as the once-safe-haven yen sank to a three-decade low – a reminder that market participants still view the Middle East primarily as a risk, albeit a growing one as the Interest rates remain the main risk issue. [FRX/]

To mitigate this risk, US President Joe Biden told Israeli Prime Minister Benjamin Netanyahu that the US would not take part in a counteroffensive against Iran.

Still, the Cboe Volatility Index, or VIX – known as Wall Street’s fear indicator – is hovering near its five-month high.

Oil prices were lower in Asia, although some analysts said that was because the risk of what Iran described as retaliation had already been priced in last week and traders were waiting to see whether worries about a larger war actually emerged.

Brent futures hovered around $90 a barrel after hitting a roughly six-month high on Friday. It is up 17% for the year, while U.S. crude oil futures have gained 19% year-to-date.

Any further rise in oil prices toward $100 a barrel will be unwelcome news for central bankers grappling with rising consumer prices, as last week’s hotter-than-expected U.S. consumer price report continued reverberates in the markets.

Later in the day, traders will get a sense of the U.S. consumer’s strength as last month’s retail sales are in.

A number of Federal Reserve speakers are also scheduled this week, with Chairman Jerome Powell’s comments on Tuesday in the spotlight.

With U.S. inflation exceeding forecasts for three months in a row, it’s hard to imagine the world’s most powerful central banker sticking with the same, slightly more dovish tone from last month.

While the geopolitical backdrop is likely to set the tone for the week, there are also plenty of economic events for traders to take note of, from China’s first quarter economic growth figures to UK consumer prices.

The US earnings season is also underway, but it got off to a lackluster start after reports from the big three banks – JPMorgan Chase & Co, Wells Fargo and Citigroup – disappointed investors and sent Wall Street lower.

Key developments that could impact markets on Monday:

– Eurozone industrial production (February)

– US retail sales (March)

– Profits from Goldman Sachs and Charles Schwab

– Mary Daly and Lorie Logan from the Fed speaking

(By Rae Wee; Editing by Christopher Cushing)

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