Mixed trend in Europe; Slight increases in contracts in New York

10:33

Despite the sharp declines in Asia this morning, the stock markets of Europe are not following the negative trend and are trading in a mixed trend – Paris and Frankfurt with slight declines, London with a slight increase.

07:48

Asian stock markets continue to trade this morning with sharp declines. The Nikkei falls 3.4%, the Kospi loses 2.9%, and the Hang Seng drops 0.9%. Shenzhen traded close to base levels, and contrary to the trend, the Shanghai index rose slightly by 0.2%.

The contracts on Wall Street, which traded earlier in declines of about 0.5%, are now trading stably.

Meanwhile, approxWhat the managers of the major bond funds on Wall Street say is that the financial markets are underestimating the risk that the US war with Iran will cause a sharp slowdown in the already faltering economy.

With oil prices climbing above $110 a barrel and the conflict showing no signs of ending, traders focused mostly on the inflationary shock. This led the US government bond market (Treasuries) to the sharpest monthly decline since October 2024, as investors prepare for the possibility that the Federal Reserve will raise interest rates before the end of the year.

But in companies like Pimco and J.P. Morgan investment managers are actually preparing for economic damage that will eventually lead to a recovery in the bond market and lower yields. “Every day that the conflict continues brings us closer to the moment when the market will be forced to consider the more negative consequences on growth, which should ultimately lower government bond yields,” said Kelsey Brough, manager of bond portfolios at J.P. Morgan, “Yields have risen enough to be attractiveness.”

However, some of the veteran bond investors claim that the declines have created an opportunity to lock in high yields, with inflation concerns overshadowing the risk of harm to growth.

“What tends to start as an inflation shock can quickly turn into a growth shock,” said Daniel Ibsin, chief investment officer of Pimco, which manages more than $2 trillion in assets. “And we are on the verge of seeing a significant weakening of the economy.”

05:50

The turmoil in the markets intensifies with the opening of the World Trade Week, with Asia in focus. The stock markets in Tokyo and Seoul fall by more than 4% each. Since the outbreak of the war, both have weakened by more than 10%. In Hong Kong and Australia there are also price decreases, although more moderate at a rate of about 1.5%.

● Analysis | The markets are losing patience: will the end of the war in Iran bring back the rally?
● What is expected today in trade, and which sectors will be the biggest gainers the day after the war?

The reason for the pressure is once again oil prices, which record another jump. The price of a barrel of Brent is now about $116. This is an increase of about 90% since the beginning of the year. The price of a barrel of American oil stands at just over 101 dollars. This is an increase of over 2% compared to the end of last week’s trading.

The negative trend is expected to reach New York and Europe as well: the contracts on Wall Street indicate decreases of about half a percent in the leading indices. This, after sharp falls over the weekend that put the Dow Jones and Nasdaq indices into “correction” territory – a drop of more than 10% from the record – for the first time in almost a year. This is after five negative weeks in a row. The picture is similar in Europe as well, and the contracts on the Eurostox index indicate a decrease of about 1.5%.

The upheaval in the markets reflects that investors are preparing for a prolonged conflict in the Gulf and do not expect the war in Iran to end soon. The consequences are a jump in inflation and a risk of recession in large parts of the world.

The British newspaper “Financial Times” quoted US President Donald Trump on Sunday as saying that the US may take control of Kharg Island in the Persian Gulf, from which Iran exports most of its oil, but added that a ceasefire may be reached quickly.

Pakistan, for its part, announced that it is preparing to host “significant talks” to end the conflict in the coming days, despite Tehran previously accusing Washington of preparing for a ground invasion. The “Wall Street Journal” reported that President Donald Trump is considering a military operation to extract the enriched uranium from Iran, although it was noted that Trump has not yet made a final decision on the matter.

in G. According to Morgan, they warn that “the longer the Strait of Hormuz remains closed, the more the erosion in the backup stock will worsen, which could ignite dramatic increases in the prices of crude oil, natural gas and other commodities.”

Returning to pricing interest rate increases

There is also high alertness in the debt market: the yield on the 10-year US government bond has now retreated slightly to a level of 4.4%. However, in a monthly summary, this is a dramatic jump of nearly 50 basis points in yields – a move that reflects the serious fear of investors of an inflationary flare-up that will force the central banks to keep interest rates high for a long time and even raise them.

In the US, the markets now embody the possibility of one interest rate increase this year, compared to two reductions that were priced in a month ago. Later today, Fed Chairman Jerome Powell is expected to comment on the situation.

In Israel, Governor Prof. Amir Yaron will deliver the interest rate decision this afternoon (16:00) and according to all estimates no change is expected. However, while just a month ago the markets were pricing in three downloads later this year, now only one is in play.

In Europe, three interest rate hikes are now priced in later this year.

The dollar strengthens, gold weakens

In the currency arena, the US dollar is strengthening and enjoying its status as a liquid “safe haven” and the advantage of the US as a net energy exporter. Against the Japanese yen, it is trading at a level of over 160 yen – a level that was last crossed only in July 2024. In contrast, the euro remains under pressure and is trading close to a monthly low. Against the shekel, the US currency is trading at a rate of 3.14 – the highest level in two months.

On the metals side, gold registers another decrease of about 1% to a level of about $4,450 per ounce. On the other hand, the price of aluminum jumps up to 6% amid reports of attacks on production sites in the Middle East. ,