US Stocks Rally to Start the Week – Dow Up 1.58%
US stocks started the week on a positive footing as optimism in the market spread that the conflict in the Middle East may not be as extensive as some expected. The Dow Jones powered higher to close the day 1.58% up, the S&P rose 1.20% and the Nasdaq climbed 1.16%. US treasury yields ground higher again, the 10-year notes rising 4.1 basis points and the 2-year adding 2.5 to trade around 5.037%. The dollar dropped 0.5% against most of the majors with USDJPY the standout as investors looked ahead to a potential policy tweak from the Bank of Japan. Oil prices fell over 3% on the back of renewed optimism in the Middle East and Gold dropped to trade back under the key $2,000/oz level.
Oil Prices Remain Volatile as Traders Keep Monitoring the War
Oil Prices dropped more than 3% yesterday as fear receded that the conflict in the Middle East would disrupt supplies from the region. Benchmark Brent was down 3.35% on the day, now trading around $87.45 a barrel and West Texas Intermediate finished the day 3.78% lower at $82.31. This has now ‘filled in the gap’ in the market that the start of the conflict created but there is some concern that traders are viewing the situation from a glass-half-full perspective. News reports from the region do not paint a picture of a peaceful outcome anytime soon and risks do seem to sit with further escalation, and if Lebanon or Syria do come into the conflict to a greater degree, then expect Oil to rally strongly again. On the whole, traders are expecting a lot more volatility before we can see any strong trend patterns resume.
Bank of Japan in Focus for Traders Today
It is a full day on the economic event calendar today with the Bank of Japan the highlight in the Asia Pacific session, with the announcement likely to come out around lunchtime in Tokyo. Before we have the rate call from the BOJ, the market’s focus will be on China with the release of the Manufacturing and Non-Manufacturing PMI data. The European session sees the release of the Euro CPI estimate data but there is a raft of data due out in the New York session. The initial focus will be on Canadian GDP and US Employment Cost Index numbers which come out at the same time, the later in the day the Chicago PMI data is due just before the CB Consumer Confidence print.
