Although markets have clearly moved on these words, I feel his comments were ambiguous at best – the conflict is either over or it is not. In my opinion, this is unlikely to be the end of the operation, and caution remains warranted.
Stocks: ‘Engulfing’ the Uncertainty
Over in Stocks, major US benchmarks rebounded higher on Trump’s comments, delivering textbook bullish engulfing candles across the board. Albeit down a little more than 1% at the opening bell, the S&P 500 added 56 points at the close (0.8%) at 6,795, chalking up a final-hour recovery that underscored the market’s underlying bid.
Despite uncertainty remaining elevated – particularly regarding the duration of the war, and, of course, the situation regarding the Strait of Hormuz – the VIX pulled back from its 30.19 high to around 23.00.
Market breadth for the S&P 500 was broadly neutral, despite sector performance showing more winners than losers, with technology leading the way, up 1.8%, and financials and energy down around 0.5%, respectively.
Dollar Fades as Risk Appetite Returns
In FX, the USD surrendered earlier upside, finishing the session off its best levels, down 0.1%; the pullback mirrored the broader de-escalation narrative. While an end to the conflict would certainly weigh on the USD and US Treasury yields, as I noted above, I feel this is far from over.
The CAD ended Monday modestly lower versus the buck, tracking the retreat seen in Oil. Meanwhile, the JPY gained modest ground, with the USD/JPY pencilling in a high of ¥158.90 – levels not seen since late January. As you would expect, procyclical currencies fared well yesterday, with both AUD and NZD ending the session higher against their G10 peers.
