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Investors are most long commodities since April 2022; stock market sentiment turns bearishIran’s Supreme Leader says “not the right time for peace”, US and Israel must be defeatedGermany March ZEW economic sentiment index -0.5 vs 39.0 expectedStrait of Hormuz disruption keeps oil prices supported; de-escalation is the only fixItaly February final CPI +1.5% vs +1.6% y/y prelimMilitary escorts not a sustainable solution to opening up Strait of Hormuz, says IMO chiefGold remains stuck in a tight range as traders await new catalysts to trigger a breakoutSwitzerland February producer and import prices -0.3% vs -0.2% m/m priorWhat are the main events for today?One down, six more to go on the week..FX option expiries for 17 March 10am New York cutRBA governor Bullock: If we have to change tack on policy, we will do soRBA governor Bullock: Cash rate was not high enough to bring inflation back to the targetAussie dollar sees a mixed reaction as the RBA delivers another rate hike todayIt’s been a light session in terms of news releases and market moves. On the data front, the main highlight was the German ZEW survey which collapsed to -0.5 vs 58.3 in the prior month. The US-Iran war and the surge in energy prices were responsible for this poor reading.On the news front, we just got a Reuters report saying that Iran’s new Supreme Leader has rejected proposals aimed at de-escalating tensions with the United States and Israel according to a senior Iranian official.The official told Reuters that Khamenei’s stance for revenge against the US and Israel was “very tough and serious”. He reportedly told the session that the Islamic Republic would not seek to reduce tensions until the US and Israel are defeated and forced to pay compensation for damages.On the markets front, the US dollar continues to pull back from the highs reached in the final part of last week on what looks like profit-taking from extreme levels rather than a change in fundamentals as we haven’t got any meaningful catalyst to trigger a reversal yet. Looking at the other markets, it’s been mostly boring rangebound price action as traders await new developments on the US-Iran front. Oil prices eased from the Monday highs but the path of least resistance remains to the upside.In the American session, we only have the weekly US ADP jobs data which hasn’t been a market-moving report for a long time now. Despite the very weak NFP report, all the other labour market data, including the ADP, have been pointing to stabilisation. The NFP might have been just a blip, but if we start to see deterioration in other data as well, then the Fed will have to take a hard decision because both the mandates will be in tension.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
With investors heavily long on commodities since April 2022, the market’s bearish stock sentiment is raising eyebrows. The recent comments from Iran’s Supreme Leader indicate geopolitical tensions are far from easing, which could keep oil prices elevated. The ZEW economic sentiment index from Germany, coming in at -0.5 versus the expected 39.0, signals a significant downturn in economic outlook, potentially impacting European equities. Traders should watch for how these factors interplay; if oil prices remain buoyed due to disruptions in the Strait of Hormuz, commodities could continue to outperform stocks. However, the bearish sentiment in equities suggests a potential rotation out of risk assets, which could lead to increased volatility. Here’s the thing: while commodities are currently favored, the underlying economic indicators hint at a broader risk-off environment. Keep an eye on the S&P 500 and key support levels; a break below recent lows could trigger further selling pressure. Watch for any signs of de-escalation in geopolitical tensions, as that could shift sentiment quickly.
📮 Takeaway
Monitor the S&P 500 for key support levels; a break below recent lows could signal increased selling pressure amid bearish sentiment.
