Newsquawk US Market Wrap: Israel-Iran conflict leaves stocks sold with higher crude prices weighing on bonds

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  SNAPSHOT: Equities down, Treasuries down, Crude up, Dollar up


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  REAR VIEW: Israel strikes Iran, hitting nuclear facilities and military personnel; Iran hits back; Both Israel and Iran say the other is to pay a heavy price; Trump says Israel's attack could help make a deal with Iran; UoM prelim tops expectations; US moves to ease rules hindering TSLA's Cybercab.


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  COMING UP: Data: China House Prices, Retail Sales & Industrial Output, US NY Fed. Speakers: ECB’s Cipollone & Nagel. Supply: US.


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  WEEK AHEAD: Highlights include Chinese Activity Data, BoJ, US Retail Sales, UK CPI, Riksbank, FOMC, BoE, SNB, Norges Bank, Japanese CPI, MOF Bond Meeting. Click here for the full report.
  


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  CENTRAL BANK WEEKLY: Previewing BoE, BoJ, FOMC, PBoC LPR, SNB, Riksbank, Norges Bank. Click here for the full report.
  


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  WEEKLY US EARNINGS ESTIMATES: Thin earnings docket but highlights include LEN, ACN, KRN. Click here for the full report.
  

MARKET WRAP

Geopolitics largely dominated the tape on Friday, as Israel's attack on Iran took all the headlines and the fallout thereafter. As such, US indices saw heavy selling pressure and are closing around lows, while the Dollar gained to the detriment of all G10 FX peers, ex-CAD & NOK which were supported by rising oil prices. Antipodeans were the G10 laggards given the risk-off sentiment. As expected, given the Middle East escalation, WTI and Brent soared to highs of USD 77.62/bbl and 78.50, respectively, albeit they currently sit off these levels. Treasuries were initially bid after Israel's attack overnight, but as the session progressed, they fell foul to the inflationary picture amid the surging oil prices. Elsewhere, sectors are lower across the board, aside from Energy, which is buoyed in wake of the aforementioned news. Said geopolitics was the only thing of note to end the week with attention on any updates over the weekend ahead of the FOMC on Wednesday. Do note, prelim UoM for June was strong across the board as all three readings (sentiment, conditions, expectations) topped expectations and above the upper end of the forecast range. Within it, 1yr inflation expectations also tumbled to 5.1% from 6.6%, and 5yr ticked lower to 4.1% from 4.2%.

GLOBAL

ISRAEL/IRAN: While there has been a deluge of geopolitical updates, overnight/through the day, briefly recapping - Israel attacked Iran's nuclear facilities overnight, and continued throughout the day, killing senior military figures and nuclear scientists. Israel informed the US before the strikes, but the US maintain they were not involved and Iran says they were. In response, US President Trump has urged Iran to make a deal on its nuclear programme, warning of "even more brutal" Israeli attacks, and there is more to come from them, a lot more. More recently, Iran began its response to Israel the IDF said less than 100 missiles were fired from Iran in the barrages, and most were intercepted. Following the initial Iran response, Supreme Leader Khamenei said Israel will not remain unscathed and Tehran will not go for half measures in its response. Further still, an Iranian Senior official said that nowhere in Israel will be safe and its revenge will be painful. As such, all attention over the weekend will be on any responses and further escalations. Post-Iran's attack, Israel said it would respond to the Iranian bombing by targeting civilian areas, according to Channel 12 quoting Israeli officials.

MICHIGAN: Prelim University of Michigan for June topped expectations across the board, with all three (conditions, expectations, sentiment) all printing outside the top end of the forecast range. Sentiment and Conditions rose to 60.5 (exp. 53.5, prev. 52.2) and 63.7 (exp. 59.4, prev. 58.9), respectively, while Expectations jumped into expansionary territory printing 58.4 (exp. 49.0, prev. 58.9). Looking at inflation expectations, 1yr plunged lower to 5.1% from 6.6%, while the longer-term 5yr ticked down to 4.1% from 4.2%. Within the release, Surveys of Consumers Director Joanne Hsu notes that “consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed. However, consumers still perceive wide-ranging downside risks to the economy.” In addition, she adds consumers' views of business conditions, personal finances, buying conditions for big-ticket items, labour markets, and stock markets all remain well below six months ago in December 2024.

FIXED INCOME

T-NOTE FUTURES (U5) SETTLED 14+ TICKS LOWER AT 110-19+

Treasuries sold with the rally in crude, stoking inflationary fears. At settlement, 2s +5.2bps at 3.958%, 3s +5.7bps at 3.918%, 5s +6.2bps at 4.021%, 7s +6.4bps at 4.208%, 10s +6.7bps at 4.424%, 20s +7.8bps at 4.933%, 30s +7.1bps at 4.914%.

INFLATION BREAKEVENS: 5yr BEI +3.8bps at 2.326%, 10yr BEI +2.8bps at 2.286%, 30yr BEI +2.8bps at 2.275%.

THE DAY: Upon Israel hitting Iran overnight, T-Notes saw swift upside to session highs of 111-13 from 111-03+ given the immediate risk-off trade across markets. In the European session, participants digested the inflationary angle associated with surging crude prices in response to the warfare, resulting in a gradual move lower in T-Notes for the remainder of the day to eventual lows of 110-14. The move lower was typically unusual for Treasuries, given the typical haven bid that normally follows on such a day, with participants placing more significance on upward inflationary pressures. Fed pricing saw a slight hawkish move, albeit 50bps of easing by year-end remains at play. Elsewhere, UoM prelim (June) saw sentiment, conditions, and expectations all top expectations, with the 1-yr inflation expectation falling to 5.1% (prev. 6.6%) and the 5yr ticking lower to 4.1% (prev. 4.2%)

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: June 0bps (prev. 0bps), July 6bps (prev. 6bps), September 21bps (prev. 23bps), Dec 50bps (prev. 53bps).


• NY Fed RRP op demand at USD 169bln (prev. 181bln) across 27 counterparties (prev. 34).


• EFFR at 4.33% (prev. 4.33%), volumes at USD 114bln (prev. 111bln).


• SOFR at 4.28% (prev. 4.28%), volumes at USD 2.663tln (prev. 2.600tln).

CRUDE

WTI (N5) SETTLED USD 4.94 HIGHER AT 72.98/BBL; BRENT (Q5) SETTLED USD 4.87 HIGHER AT USD 74.23/BBL

The crude complex surged on Friday after Israel launched attacks on Iran. The marked geopolitical escalation overnight from Israel set the tone for risk-off sentiment, and broader market moves. In wake of the Israeli attack overnight WTI and Brent soared to highs of USD 77.62/bbl and 78.50, respectively, albeit currently sit off those levels. There has been a deluge of geopolitical updates throughout the day, briefly recapping - Israel attacked Iran's nuclear facilities overnight, and continued throughout the day, and also killed senior military figures and nuclear scientists. Israel informed the US before the strikes, but the US maintain they were not involved and Iran says they were. In response, US President Trump has urged Iran to make a deal on its nuclear programme, warning of "even more brutal" Israeli attacks, and there is more to come from them, a lot more. In more recent trade, Iran began its response to Israel and Supreme Leader Khamenei said it will not remain unscathed and Tehran will not go for half measures in its response. Further still, an Iranian Senior official said that nowhere in Israel will be safe and its revenge will be painful. As such, all attention over the weekend will be on any responses and further escalations. For the record, in the weekly Baker Hughes Rig Count oil fell 3 to 439, Natgas fell 1 to 113, leaving the Total down 4 at 555.

EQUITIES

CLOSES: SPX -1.13% at 5,977, NDX -1.29% at 21,631, DJI -1.79% at 42,198, RUT -1.85% at 2,101

SECTORS: Financials -2.06%, Technology -1.5%, Materials -1.2%, Consumer Staples -1.15%, Real Estate -0.98%, Industrials -0.87%, Communication Services -0.86%, Consumer Discretionary -0.74%, Utilities -0.62%, Health -0.54%, Energy +1.72%.

EUROPEAN CLOSES: DAX: -1.14 % at 23,499, FTSE 100: -0.39 % at 8,851, CAC 40: -1.04 % at 7,685, Euro Stoxx 50: -1.31 % at 5,291, AEX: -0.84 % at 923, IBEX 35: -1.31 % at 13,904, FTSE MIB: -1.28 % at 39,439, SMI: -1.60 % at 12,135, PSI: -0.69 % at 7,476

STOCK SPECIFICS:

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  Adobe (ADBE): Initially saw gains post-earnings as EPS & revenue beat with strong guidance.


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  Apple (AAPL): iPhone sales capture top spot in Chinese market in May, via Counterpoint Research.


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  Thermo Fisher Scientific (TMO): Aims to sell parts of its diagnostics business for USD 4bln.


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  Tesla (TSLA): Raised the price of Model S AWD, X AWD & Plaid in the US by USD 5k.


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  Boeing (BA): Indian government is reportedly considering grounding the BA 787 fleet.


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  Walmart (WMT), Amazon (AMZN): Exploring issuing their own stablecoins.


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  RH (RH): Surprise profit per shr. & revenue topped; Solid FY guidance.


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  Synopsys (SNPS), ANSYS (ANSS): China delays approval of Cos. merger.


• US moves to ease rules hindering Tesla's (TSLA) self-driving Cybercabs, according to Bloomberg.

FX

USD was broadly firmer against peers, regaining its haven attraction. The Israel attack on Iran left geopolitics dominating headlines and price action in FX, crude, and bonds. The buck outperformed against all major peers ex-CAD, even outperforming other safe havens, CHF, and JPY. Since the Israel attack, Iran has sent multiple waves of attacks, leaving the impression into the weekend that this time the conflict won't be so quickly resolved as it was last year. Separately, US data saw much better-than-expected UoM prelim results for June, though a market reaction was largely absent. As the day progressed, Dollar managed to hold onto gains, with the inflationary theme that comes alongside a surge in crude prices supporting a rally in US yields, and as such limiting any pullback in USD.

G10 FX was largely lower to end the week, on account of the surging dollar as opposed to anything currency specific. As mentioned above, the tape was dominated by geopolitics after the Israeli attack on Iran, which aided the Dollar and saw Antipodeans underperform given the broader risk-off sentiment. AUD/USD and NZD/USD printed lows of 0.6457 and 0.5996, respectively, against earlier peaks of 0.6533 and 0.6069. CAD outperformed and managed to eke out marginal gains vs. the Buck as it benefited from the surge in oil prices.

Safe-havens, CHF and JPY, were actually weaker despite the aforementioned global risk off, with the Yen watchers awaiting the BoJ next week, whereby the bank is expected to stand pat on rates with money markets currently pricing in 12bps of tightening by year-end. GBP was dictated by the USD with Cable trading between 1.3517-3632, as participants await UK CPI and BoE next week. The latter is expected to see policymakers stand pat on policy, although the recent soft labour market data and growth metrics from the UK could lead to some dovish dissent on the MPC.

EM: The Peru Central Bank, as expected, maintained the reference rate at 4.5%, expecting annual inflation to remain on the lower end or target range in the coming months and expects core inflation to remain around 2% on the projected horizon; USD/PEN closed modestly higher. Meanwhile, the RBI is likely selling USD to support the INR due to the spike in oil, said traders cited by Reuters. For Brazil, the latest Reuters Poll signalled 27/39 surveyed see the BCB holding the benchmark rate at 14.7% on June 18th, while the remaining 12 see a 25bps hike.

13 Jun 2025 - 21:24- EquitiesGeopolitical- Source: Newsquawk