investingLive European markets wrap: Risk retreats as Iran defends nuclear position
Headlines:
- Iran supreme leader reportedly says near-weapons-grade uranium stockpile must stay in Iran
- Euro area economic activity falls at quickest pace in over two years in May
- German business activity falls for a second consecutive month amid rising cost pressures
- French economic activity falls markedly in May, steepest decline in five-and-a-half years
- UK economic activity slides in May on Middle East conflict, political turmoil
- UK industrial orders for May fall at quickest pace since 2020 on higher cost pressures
- ECB policymaker Rehn: We are moving towards the adverse scenario
- BOJ policymaker Koeda: Inflationary risk is already materialising
Markets:
- WTI crude up over 2% to $100.53
- USD leads, AUD lags on the day
- 10-year Treasury yields up 4 bps to 4.61%
- Equities drop with DAX down 0.5% and S&P 500 futures down 0.3%
- Gold down 0.7% to $4,510
- Bitcoin down 0.6% to $77,196
The session started off with a more tepid mood as US-Iran talks continue to be the main draw. But with the release of euro area and UK PMI data, the focus was split a little amid a rather set of dismal readings from the region.
The French report in particular was rather poor, reaffirming stagflation worries as we get into the second quarter of the year. And that will just make things tougher for the ECB, who look to be trying to tee up a rate hike for June next month.
Shortly after, there was a slight pick up in the market mood on some murmurs about Pakistani army chief’s visit to Iran. I cautioned on the reporting earlier here, with it coming from inconsistent sources. S&P 500 futures erased losses to move up by 0.2% before quickly cutting that back.
And as we look to close out the session, a Reuters headline is now sparking fears about the US and Iran continuing to diverge on nuclear talks. In turn, that could lead to the peace proposal breaking down or going nowhere and increasing the likelihood of the status quo in the Middle East being prolonged further.
Risk trades dropped on the headlines with equities seeing red now while the dollar and bond yields gained some slight ground.
European indices are posting losses around 0.4% to 0.5% while S&P 500 futures are now down 0.3% on the day. Nvidia’s earnings don’t seem to be enough to lift the market as investors continue to demand nothing short of perfection from the chip giant. For now, rising costs, geopolitical uncertainty, and overreliance on data center demand present major headwinds for Nvidia to keep delivering moving forward.
In FX, the dollar is holding firmer with EUR/USD dropping back to 1.1600 and USD/JPY testing waters just above the 159.00 level today. Meanwhile, 10-year Treasury yields are up 4 bps to 4.61% with 30-year yields seen up 2 bps to 5.13% currently.
In the commodities space, oil prices shrugged off the drop from earlier in the session with WTI crude recovering from a low of $97.50 to be up over 2% now at $100.53. As for precious metals, the struggle continues with gold now being dragged lower by 0.7% to $4,510.
We have US jobless claims coming up next but in the big picture, it’s still all on US-Iran developments.
This article was written by Justin Low at investinglive.com.