Middle East tensions weigh on markets

AFP | London, United Kingdom                                         

The Daily Tribune – www.newsofbahrain.com

Global oil and gold prices shot higher yesterday as worries mounted about the conflict in the Middle East widening.

The tensions overshadowed the start of US corporate earnings season, with Wall Street stocks sliding despite banks beating expectations.

“Geopolitical worries have triggered some risk aversion, but worries about a growth slowdown have presumably triggered some residual angst about corporate earnings not living up to expectations,” said Briefing.com analyst Patrick O’Hare.

Oil prices were up more than 2% as regional tensions soared after Iran threatened reprisals over a strike in Syria this month that killed two Iranian generals.

Gold also benefitted from its status as a haven investment, breaking the $2,400 per ounce level to set a fresh record.

“US stocks are falling, and gold is rising in risk-off trade as fears rise that the Israel-Hamas war could escalate if Iran directly attacks Israel, which could happen this weekend,” said Fiona Cincotta at City Index.

Investor attention had been set to focus on Friday’s start of the corporate earnings season after economic data released earlier this week largely killed off the possibility that the US Federal Reserve could begin cutting interest rates in June.

Equity markets took the recalibration of expectations of interest rate cuts in stride as data showing the US economy in strong health raised hopes that companies will keep reporting strong earnings.

At the start of the year markets had priced in six interest cuts by the Fed in 2024, but now expect only two.

JPMorgan Chase, Wells Fargo and Citigroup all reported Friday better-than-expected earnings results for the first quarter.

But their shares fell, with those in JPMorgan Chase slumping more than five% in late morning trading. Wall Street’s main indices fell at the opening bell.

Eurozone stock markets had spent much of Friday higher after the European Central Bank signalled Thursday a likely June interest rate cut, but gave up their gains as Middle East tensions rose.

London stocks fizzed higher, approaching a record intra-day high, on data showing the UK economy grew for a second straight month in February, further fuelling recovery hopes after sliding into a shallow recession in the second half of last year.

Dimming hopes for US rate cuts continued to support the dollar, which surged to another 34-year high above 153 yen, putting Japanese officials in the spotlight after they said they were ready to intervene in markets to support their currency