Macro update
Global equities retreat as conflict intensifies:
Asian markets fell sharply after US and Israeli strikes on Iran escalated tensions, with MSCI Asia-Pacific ex-Japan down 2.9%, South Korea tumbling 7.2% and Japan’s Nikkei 225 sliding 3.1%, while US futures also pointed lower.
Oil climbs on Hormuz concerns:
Brent crude oil gained around 4% to trade at $80 a barrel, building on an 6% rise since Monday as Iran threatened to close the Strait of Hormuz, sending tanker rates above $400,000 per day and heightening supply disruption fears.
Energy shock fuels inflation worries:
Gas prices in Europe and Asia surged, and analysts cautioned that a sustained 20% rise in Brent could shave roughly 2% off regional earnings, increasing pressure on margins and inflation.
Dollar firms, yen and euro soften:
The US dollar index hovered near a six-week high amid safe-haven demand, while the Japanese yen and euro weakened due to their economies’ heavy reliance on energy imports, with Japanese authorities signalling readiness to intervene if necessary.
Gold extends safe-haven rally:
Spot gold advanced for a fifth consecutive session, rising about 1% to around $5380 an ounce.
Rate-cut expectations pushed back:
Markets now expect the Federal Reserve (Fed) to keep rates unchanged in March, with a cut not fully priced until September, as higher oil prices and firm US factory data raise concerns over renewed inflation and stagflation risks.
DAX 40 falls out of bed
The DAX 40 is rapidly falling and is expected to probe its 24,273 early February low, a fall through and daily chart close below it would change our medium-term outlook to a bearish one.
Resistance is seen at Monday’s 24,578 gap low.
Short-term outlook:
Bearish while below 24,897, this week’s high.
Medium-term outlook:
Toppish, a daily chart close below the 24,273 early February low would put the 200-day simple moving average (SMA) at 24,176 on the map, followed by the mid-December 23,924 low.