Spikes All Around
CPI, crude oil, and yields jumped.
Minutes from the Federal Open Market Committee meeting in March show that central bankers were already questioning whether progress on inflation had stalled.By the time that news hit the tape the odds of a June rate cut had been reduced to approximately zero after another set of hotter-than-forecast Consumer Price Index data.
And crude oil was already surging on a Bloomberg report that US officials expect an attack by Iran on Israel in retaliation for Israel’s bombing of Iran’s embassy in Syria last week.
As we discussed in the April 5 StockPick Daily, geopolitical risk shows up in energy markets and the price of oil, with inflationary effects. It can also have broader deflationary impacts because of general disruptions to everyday life.
A wider Middle East conflict is one of three major geopolitical issues weighing on markets, along with the war wrought by Russia on Ukraine and China’s re-emergent designs on Taiwan.
The US and its allies believe major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent, in what would mark a significant widening of the six-month-old conflict, according to people familiar with the intelligence.
The generic front-month crude oil futures contract has gained more than 20 percent so far this year, with OPEC+ production cuts and continuing limits on output providing additional upside support.
Stocks were down across the board but closed off their lows, and yields spiked anew, with the 10-year US Treasury rising to 4.56 percent. This yield spike is worth monitoring. If it levels out and proceeds in a more orderly fashion stocks can also rise.
Gold gave up some of its recent gains, but Bitcoin $BTC was up more than 1 percent during the 24 hours into the close on the New York Stock Exchange and looked to be closing in on the $70,000 level again.
Let’s hope this morning’s biggest news is the release of Producer Price Index data for March at 8:30 a.m. ET.