The ongoing stalemate in the Iran war has pushed up oil prices, and the global bond sell-off has continued, heightening concerns over inflation and increasing market expectations that central banks around the world will need to keep tightening monetary policy.
The yield on 30-year US Treasuries rose to its highest level in nearly three years. The yield on 10-year Japanese government bonds climbed 10 basis points to its highest level since 1996, while the yield on 30-year bonds soared 20 basis points to a record high since their issuance in 1999. Bond prices also fell in Australia and New Zealand.
As bond yields soared, the stock market continued its decline from record highs. Asian stocks fell 0.7%, but South Korea’s KOSPI – the best-performing benchmark index globally this year – erased its early losses, rising 1.1%, mainly due to a rebound in Samsung Electronics’ share price. European and US stock futures indicated further declines in the stock market.
The US dollar rose for the sixth consecutive day as the preferred safe haven during the Middle East conflict. Non-yielding assets such as gold and silver declined. Brent crude oil prices rose by about 2% to above $111 per barrel, having climbed nearly 8% in the previous week, which weighed on market sentiment. Meanwhile, no progress has been made in efforts to reopen the crucial Strait of Hormuz. US President Donald Trump also said that time was running out for Iran to reach an agreement.
The market turmoil on Monday extended the sell-off in stocks and bonds that began last Friday, as concerns grew that the actual closure of the Strait of Hormuz would push up oil prices, exacerbate inflation and prompt central banks to maintain high interest rates. The key test for investors this week will be Nvidia’s earnings report. For months, the stock market has ignored the rising macro risks, betting that the company’s multi-billion-dollar investment in promoting artificial intelligence would drive corporate earnings growth.
According to Yardeni Research, the Federal Reserve needs to catch up with the bond market, or it will risk losing control of borrowing costs as investors become increasingly concerned about inflation.
“If the Fed does not dispel inflation expectations, investors will believe that the central bank’s policy lags behind the inflation curve and demand a higher inflation risk premium,” Ed Yardeni, president and chief investment strategist, wrote in a report. “We expect the Fed to keep interest rates unchanged at its June meeting and shift to a tightening monetary policy.”
Iran’s semi-official Mehr News Agency said that Washington “has not made any substantive concessions” but is trying to “obtain concessions it failed to get during the war, which will lead to the deadlock of the negotiations.”
Meanwhile, a drone attack caused a fire at a nuclear power plant in the United Arab Emirates, highlighting the risks faced by the fragile ceasefire agreement.
Technical analysis:
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Gold: The US-Iran agreement has made no progress. The gold price dropped below 4500 in the early morning but then rebounded. There is a possibility that it will test the new low again to clear out liquidity within the day. If the above situation occurs, we will consider starting to capture the long signal of the rebound after the second sweep. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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The Nasdaq index: The price has experienced a temporary pullback. In the yellow zone we alerted through the plugin, signs of stabilization have emerged. For today, we will continue to wait for the liquidity sweep near 28,600 before looking for new rebound opportunities. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The price continues to rebound above 100. We remain on the sidelines for long positions. For today, we will pay attention to whether new short-selling forces emerge after entering the 110-115 range. If so, we will try to catch the institutional tailwind signal. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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