Macro update
Asian stocks slide:
Regional equities declined, with the MSCI Asia-Pacific index falling around 1% and Japan’s Nikkei 225 down 1.4%, putting the region on course for a second straight weekly loss as the Iran conflict weighed on sentiment.
Oil surge stokes inflation fears:
Brent crude oil traded near $100 a barrel after jumping more than 8% on Thursday, with supply disruptions tied to the closure of the Strait of Hormuz keeping energy markets tight despite emergency reserve releases.
Wall Street pressured by energy shock:
US equities fell sharply overnight, with the Dow Jones, S&P 500 and Nasdaq 100 each dropping more than 1.5% as the oil spike heightened concerns about inflation and economic growth.
Rate-cut expectations scaled back:
Traders have trimmed expectations for Federal Reserve (Fed) easing this year to around 20 basis points, down from roughly 50 basis points last month as higher oil prices threaten to lift inflation.
Dollar strengthens as safe haven:
The US dollar climbed to a three-month high and has risen about 2% since the conflict began, while the yen weakened to a 20-month low near ¥160 per dollar.
Gold slips despite geopolitical tensions:
Bullion edged slightly higher on Friday but remains about 1% lower for the week, as the surge in energy prices dampens expectations for near-term interest rate cuts.
S&P 500 drops sharply
The S&P 500 fell out of bed on Thursday and dropped to 6,671, a fall below which could lead to Monday’s low at 6636 being revisited.
While minor support at 6671 holds, though, the December and 3 March lows at 6711 – 6721 may be revisited.
Short-term outlook:
Bearish while below Tuesday’s 6845 high; if overcome, we would turn bullish.
Medium-term outlook:
Neutral while above the 6711 current March low but below the 7002 January peak; a drop through 6711 would eye the 200-day simple moving average (SMA) at 6600.
