Market Status: Red start to the week in Asia and on Wall Street futures
Globes presents an update on the state of global markets. Monday morning: escalation between the USA and Iran shifts sentiment after a month of relative calm. On Wall Street, bets on a near-term interest rate hike are rising, while stock exchanges in Tokyo and Seoul are losing over 1%.
The global trading week opened with a new exchange of blows between the USA and Iran that occurred overnight (between Sunday and Monday). American forces attacked two Iranian missile launchers on Larak Island in the Strait of Hormuz after Islamic Revolutionary Guard Corps forces were observed preparing to launch rockets carrying sea mines toward the area. In response, Iran carried out launches against American ships and also fired missiles at American bases in Jordan.
Simultaneously, President Donald Trump published an AI video on his social network, Truth Social, showing Kharg Island, Iran's main oil export terminal, being bombed by American forces. In response to the renewed rise in tension, oil prices are climbing by about 2%, with Brent crude crossing the $90 per barrel threshold. Asian stock exchanges are trading lower, as are Wall Street futures.
Asia and Wall Street
Asian stock exchanges are trading lower this morning. The Japanese Nikkei is down by over 1%, the Hong Kong Stock Exchange is losing about 0.6%, the Shanghai Stock Exchange is retreating by about 0.2%, and the South Korean KOSPI is weakening by about 1.5%.
Trading in Wall Street futures is also currently taking place with price declines. Nasdaq futures are down by about 0.5%, S&P 500 futures are weakening by 0.4%, and Dow Jones futures are losing about 0.3%. Last Friday ended with declines against the backdrop of the hawkish speech by Fed Chair Kevin Warsh at Jackson Hole. While Warsh did not commit to an interest rate hike, he noted: "We must be sure that inflation is moving toward the target with sufficient clarity and speed. Otherwise, we have work to do."
Yields on US government bonds climbed across the curve: the two-year yield jumped by nearly 12 basis points to 4.35%, while the ten-year yield climbed by about 5 basis points to 4.72%. Simultaneously, the probability of an interest rate hike priced in by markets has doubled to 60%.
Commodities and Tel Aviv
Gold continues its downward path, falling by over 1% to around $4,470 per ounce as expectations for a US rate hike increase. In Tel Aviv, trading is expected to open with declines as investors react to both the hawkish Fed rhetoric and the renewed US-Iran tension, which could impact tomorrow's Bank of Israel interest rate decision. Dual-listed stocks are expected to return from Wall Street with a significant negative arbitrage gap of about 1%.
