While both Spot Gold and Silver caught an early bid – with the former inching closer to all-time highs of US$5,598 – Gold ended Monday largely unchanged, and Silver surprisingly fell 4.7%.
In the fixed-income space, despite a short-lived gap lower, US Treasury yields rose across the curve. Amid rising Oil and Gas prices, investors are beginning to trim Fed rate-cut expectations. Money markets now price in just 46 bps of easing for the year-end, down from 53 bps a week ago.
Across FX, the USD Index posted a solid 0.9% gain on the day, supported by safe-haven demand, but really found its footing after media outlets reported attacks on Oil plants in the Gulf. The EUR and JPY also took sizeable hits of about 1.0% versus the buck. It is all about Oil right now – Europe and Japan are heavily exposed to energy shortages and price hikes, hence their accelerated depreciation after the news of attacks on Oil plants.
In the equity space, however, major US benchmarks demonstrated surprising resilience and ended pretty much flat across the board. Earlier downside opening gaps triggered by the weekend’s US-Israeli strikes on Iran, and subsequent retaliatory actions in the Middle East, were met with buying. European Stocks were less robust, with the Stoxx Europe 600 diving 1.6% and France’s CAC 40 down 2.2%. Overnight, we saw a similar picture in Asian equity markets: Japan’s Nikkei 225 slid 3.0%, while South Korea’s KOSPI erased more than 7.0%!
US Manufacturing Prices Surge to Their Highest Level Since Mid-2022
On the macro front, the US February ISM Manufacturing PMI landed yesterday and came in at 52.4, above the 51.8 median estimate, though below the 52.6 reading in January. The prices paid sub-index proved interesting reading, jumping 11.5 points to 70.5 from 59.0, marking its highest level since mid-2022. According to the report, the surge was primarily driven by increases in steel and aluminium prices, as well as tariffs on many imported goods. Tariff-driven inflation creates a particularly challenging situation for the Fed, as it effectively imposes price rises from outside the country.
Today’s Calendar
While the geopolitical situation remains front and centre for markets, the February eurozone CPI inflation report lands at 10:00 am GMT today, closely followed by the UK spring statement at 12:30 pm. Additionally, three Fed officials will hit the wires, including Williams, Schmid, and Kashkari.
