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Geopolitics, higher rates rattle markets

Media reports about blasts in Iran believed to be Israeli missiles increased uncertainty on capital markets. Gold briefly shot up and oil was also trading higher. In addition to geopolitics, higher rates pressured stocks markets at the end of the week.

Shane Strowmatt, LGT
Reading time
5 minutes
Global stocks drop
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Gold briefly jumped above USD 2,400 per ounce overnight to Friday following media reports about an Israeli missile attack on Iran launched in retaliation for last weekend’s attack by Iran. The safe-haven asset was trading around USD 2,390 per ounce Friday morning, not far off its all-time high from last week. Oil also shot up briefly, with Brent futures breaching USD 90 per barrel and West Texas Intermediate trading above USD 86 per barrel.

In New York, stock indices couldn’t hang on to gains made early in the session on Thursday. Increasing yields on US government debt - driven by the “higher for longer” narrative - put pressure on stocks midday. Yields on two-year Treasuries were trading just under the psychologically important 5% level on Thursday. Higher yields were driven by more solid labour market data: First-time applications for unemployment benefits remained at 212,000 last week, unchanged from the previous week. The moderately low level of new applicants was the next piece of data to suggest the US labour market can withstand higher rates for longer. On Tuesday, Federal Reserve (Fed) Chair Jerome Powell cited the strong labour market and sticky inflation as reasons the central bank may need to keep rates elevated for some time to come. The Dow Jones Industrial finished Thursday up 0.1% while the S&P 500 and Nasdaq-100 lost 0.2% and 0.6%, respectively.

On Thursday, Netflix became the next tech stock to be punished for not meeting investors’ lofty expectations when presenting first-quarter results. The stock fell almost 5% in after-hour trading despite reporting earnings figures that beat Wall Street’s expectations as well as reporting excellent subscriber growth. In the current quarter, Netflix expects revenue to come in slightly below analysts’ current expectations.

In the Asia-Pacific region, stock markets plummet on the last trading day of the week. Traders were cautious as details about the extent of the reported Israeli attack on Iran emerged. Japan’s Nikkei 225 was leading regional losses, trading down 2.4% after inflation slowed in March. The Core Consumer Price Index (CPI), which excludes fresh food, increased 2.6% when compared with the same month a year earlier. The Bank of Japan is looking to keep inflation stable around 2% after ending its negative rates policy last month. In South Korea, the Kospi was trading 1.7% lower and Australia’s S&P/ASX 200 fell 1.1%. Hong Kong's Hang Seng Index was down 1.2%, while the Shanghai Composite lost 0.2%.

Swiss foreign trade decreased in the first quarter of 2024. Exports fell by 0.8% on a seasonally adjusted basis when compared to the previous quarter, driven by lower shipments of jewelry, watches and precision instruments out of Switzerland. Imports decreased faster than exports, falling by 1.9%. The trade balance resulted in a surplus of CHF 8.6 billion.

In individual stocks out of Switzerland, shares of automation company ABB gained 6.3% after the Swiss-Swedish firm posted strong quarterly results driven by its electrification business. Switzerland’s SMI stock index finished Thursday essentially flat and the Euro Stoxx 50 gained 0.5%.

Corporate news in focus: Quarterly figures from American Express, Procter & Gamble.

Economic data in focus: German Producer Price Index, UK retail sales.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
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