Markets closed Friday on a mixed note as attention remained on the risk of disruptions in the Strait of Hormuz, although Trump signalled openness to a deal with Iran. Oil prices ended little changed after a choppy session and TTF gas prices fell.
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Risk aversion intensified on Monday after President Trump reinstated the Hormuz blockade for Iranian ships and imposed a transit levy on non-Iranian cargo, fuelling concerns over energy supply disruptions. Brent crude oil prices rose sharply, inflation expectations moved higher and market volatility increased.
Softer-than-expected US inflation data drove a decline in Treasury yields, while equity markets showed a mixed performance across the Atlantic. US June PPI came in below expectations, following the previous day’s soft CPI, while Fed officials struck a hawkish tone but signalled patience, prompting a repricing of Fed rate expectations, with the probability of an additional hike declining to around 40%. US Treasury yields declined, with a flattening of the curve led by the short end.
Market sentiment remained downbeat due to persistent geopolitical tensions in the Middle East and continued weakness in AI-related market segments. In commodities, energy prices lacked clear direction, with Brent edging lower and TTF prices rising. The dollar strengthened modestly against the euro, on expectations of a resilient U.S. economy.
Markets ended the week on a cautious note, driven by a deterioration in investor sentiment towards the Middle East conflict and a selloff in tech stocks. Brent oil prices rose nearly 5% to close above $88 per barrel, and TTF gas surged towards €60 as the U.S. and Iran stepped up attacks across the Gulf.
Brent oil and TTF gas whipsawed and stock markets were mixed as hostilities in the Middle East continued to weigh on investor sentiment. Tech equities steadied after last week's rout, but both the S&P 500 and the Eurostoxx closed moderately lower.
Global markets traded on a risk-on note in yesterday's session. Stocks rallied across advanced and emerging economies, supported by a recovery in semiconductor shares. The improvement in investor sentiment defied higher energy prices in commodity markets, as the price of Brent crude rose above $90 per barrel amid ongoing tensions in the Middle East.
Investor sentiment was mixed in yesterday's session. Energy prices crept up as the U.S. and Iran continued to exchange fire and Brent oil briefly topped $95. Stocks rose across Europe but the U.S. S&P 500 and Nasdaq closed lower amid a mixed performance of tech stocks and ahead of key Q2 earnings releases.
Risk-off sentiment took over yesterday's session. Oil and gas surged amid escalating tensions in the Middle East (eg., the Houthis attacked two Saudi Arabian tankers in the Red Sea), sending global stocks lower and triggering higher sovereign yields across the board. In FX markets, the U.S. dollar index strengthened towards a one-month high.
Markets ended Friday with a cautious tone as lower energy prices supported sovereign bond yields amid resilient macroeconomic data. Yields declined on both sides of the Atlantic, more markedly in the euro area, with peripheral spreads tightening, as Brent crude retreated from $100/barrel.
Risk appetite surged on Monday as US strikes on Iran remained paused for a second consecutive night. Energy prices declined sharply, with Brent dropping below $90 per barrel. This lowered inflation expectations, with euro area 1Y inflation swaps falling by around 0.2 p.p. to 2.4%. Sovereign yields also declined across the board, particularly in the euro area.
Markets weighed lower geopolitical risk and falling energy prices against growing concerns over AI-capex returns. Brent oil fell to $84/barrel, lowering inflation expectations (especially in the short-term) and sovereign yields on both sides of the Atlantic.
Thursday was dominated by a hawkish-hold FOMC, ongoing AI-capex concerns, and a sharp re-escalation of the US-Iran war.
Risk appetite improved on Thursday amid supportive macro data and lower energy prices, as war tensions around Hormuz did not escalate. Eurozone sovereign yields fell, with steeper curves and tighter peripheral spreads, after GDP growth surprised to the upside across the euro area and its main economies. ECB expectations were little changed ahead of today’s June CPI print, though markets pared odds of a third rate hike.
COVID-19 is having a huge impact on economic activity in Spain and, in particular, on the tourism industry. At CaixaBank Research we expect GDP to fall by between 13% and 15% in 2020, not returning to its pre-crisis levels until 2023. The outlook in 2020 is even grimmer for Spain's tourism industry as it is one of the sectors hardest hit by the pandemic.
The COVID-19 pandemic has highlighted the importance of the agrifood sector as a mainstay of the Spanish economy. During the months of lockdown, the entire food chain (which includes farmers, breeders, fishermen, cooperatives and the food industry, wholesalers, retailers, distributors and logistics operators) had to adapt quickly to secure the population's food supply. In retrospect, it is only fair to acknowledge the excellent response by the whole sector in tackling this challenge.
Activity in Spain’s real estate market is recovering from its extraordinary slump during the first lockdown. In Q3 2020, house sales and new building permits recovered much of the ground lost, a positive trend we expect to consolidate in 2021. Moreover, the impact of the crisis on house prices has been relatively moderate so far, although we expect these will continue to adjust in the latter part of 2020 and the first half of 2021. In particular, CaixaBank Research’s new house price forecasting models at the level of province, based on large amounts of information (big data) and applying machine learning techniques, predict that house prices will fall in 7 out of 10 Spanish provinces in 2021 and grow very moderately in the rest.
The Fed held its benchmark short-term interest rate and said it will continue to buy $80 billion in Treasury securities and $40 billion in mortgage-backed securities each month. Policymakers now see the first rate increase coming in 2023 instead of 2024.
Investors are now debating when the Fed is likely to start trimming its monthly bond purchases, while the Bank of Japan announced it will unveil a new tool to support efforts to address climate change.
The retail trade is one of the Spanish economy’s main service sectors. The sector as a whole has shown itself to be much more resilient than other services, posting a much smaller reduction in activity than the slump observed in the Spanish economy as a whole. Part of this commendable resilience comes from retail’s extraordinary ability to adapt to online sales channels, speeding up a trend that had already been taking hold for years and which we quantify in this report based on internal CaixaBank data. In 2021, the outlook for retail is one of recovery thanks to progress in the vaccination campaign, which will enable a gradual but rapid lifting of restrictions in Q2 2021 on trade and movement, including international.