(March 30): Treasuries firmed, supporting US stocks, as fears that the war in the Middle East will trigger a sharp economic slowdown prompted traders to dial back bets on higher interest rates. Brent hit US$116 ($149.56) a barrel.
US yields fell across the curve after money markets cut the odds of a Federal Reserve rate hike in 2026 to 25%, from about 35% on Friday. The rate on two-year Treasuries dropped two basis points to 3.89%. S&P 500 futures climbed 0.4% after the benchmark slumped to an August low at the end of last week. The dollar was little changed.
The moves came after missile strikes ripped across the Middle East over the weekend as Iran and its proxies launched attacks on US allies. The arrival of a US amphibious assault group and the entry of Iran-backed Houthi forces heightened fears of escalation after a month of fighting.
While traders have so far largely focused on the inflationary shock from rising oil prices, sending the Treasury market toward its deepest monthly loss since October 2024, some of Wall Street’s biggest bond-fund managers said yields will slide as the war’s impact on growth becomes more apparent.
“It’s becoming clear that markets are expecting an extended period of high oil prices, with stagflationary implications for the global economy,” wrote Jim Reid, head of macro research and thematic strategy at Deutsche Bank AG. “The primary concern this morning has shifted back to the growth side rather than inflation.”
In Europe, the Stoxx 600 struggled for direction as bond markets also strengthened, although the slide-down in yields was less pronounced than in the US. MSCI Inc’s gauge for Asian stocks headed for the lowest since Jan 1.
See also: US stock rebound fades as bond yields, oil climb
The yen rose against all its Group-of-10 peers after Japan’s currency chief Atsushi Mimura said the nation may take bold action in the foreign-exchange market. Gold steadied after its first weekly gain since the war began, as dip-buyers supported prices.
Oil may hit a record US$200 a barrel if the Iran war drags on until June, with the Strait of Hormuz remaining shut, Macquarie Group Ltd warned. A conflict that stretches through the second quarter would result in historically high real prices, analysts including Vikas Dwivedi said in a note, outlining a scenario with odds of 40%.
An alternative outlook, with a probability of 60%, suggested the war may finish at the end of this month, they said.
See also: As the war drags on, is it time for investors here to ‘dig in’?
“Market sentiment has deteriorated, as the potential negative impacts can no longer be denied,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. “A swift end to the conflict is not currently in sight; securing supply chains must be based on solid agreements.”
Corporate news:
- Toyota Motor Corp sales dipped slightly in February, hurt by fierce competition in China’s electric-vehicle market and weak demand at home in Japan
- BYD Co signalled to analysts that exports this year will probably beat its previous target by 15%, according to people familiar with the matter.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 9.09am London time
- S&P 500 futures rose 0.4%
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The MSCI Asia Pacific Index fell 2.1%
- The MSCI Emerging Markets Index fell 1.7%
Currencies
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to US$1.1493
- The Japanese yen rose 0.3% to 159.79 per dollar
- The offshore yuan was little changed at 6.9181 per dollar
- The British pound fell 0.1% to US$1.3241
Cryptocurrencies
- Bitcoin rose 1.7% to US$67,698.68
- Ether rose 2.8% to US$2,058.04
Bonds
- The yield on 10-year Treasuries declined three basis points to 4.39%
- Germany’s 10-year yield was little changed at 3.09%
- Britain’s 10-year yield declined two basis points to 4.96%
Commodities
- Brent crude rose 3.1% to US$116.04 a barrel
- Spot gold rose 0.9% to US$4,534.78 an ounce
Uploaded by Chng Shear Lane
