West Texas Intermediate crude fell as much as 10% in early Asian trading on March 10. The trigger was a TV interview. President Donald Trump told CBS the conflict with Iran was “very complete, pretty much,” and that the military operation was “very far” ahead of its original four- to five-week timeframe.
Traders took that as a sign the Iran war could end soon. The moves spread quickly. Equity index futures in Australia, Japan, South Korea and Hong Kong all climbed, following a 0.8% gain for the S&P 500 on Monday, which came after the index reversed earlier losses. Ten-year Treasury yields stopped a five-day rise, and the dollar weakened.
A volatile session
Energy markets had been rocked by wide price swings on Monday as traders tried to read events in Iran and the effect on global supply. One headline was enough to wipe out or restore billions of dollars in value.
Carol Schleif of BMO Private Wealth expected more of the same. “We expect markets to stay very short-term focused, volatile and headline-driven as the conflict plays out this week,” she said.
Policymakers were preparing for the possibility that prices stay high. Finance ministers from the Group of Seven said they were ready to take whatever steps are needed to support energy supply, including releasing strategic oil reserves, though they had not reached that point. Reuters reported that Trump was due to look at options for bringing oil prices down, among them limits on US exports and waivers of some federal taxes.
Stocks and the risk of a rout
Steve Sosnick of Interactive Brokers described a “push/pull” in equities. Higher oil, inflation and slower growth weigh on one side. On the other is a fear of missing out that keeps a bid under stocks. “FOMO is labeled as fear, but it’s really greed, and I would assert that there is still plenty of greed out there relative to fear,” he said.
Ed Yardeni, founder of Yardeni Research, raised his odds of a market meltdown for the rest of the year to 35% from 20%. He cut the chance of a meltup, a rally driven more by investor enthusiasm than fundamentals, to 5% from 20%.
Data due Tuesday in Asia included industrial production in Malaysia, machine tool orders in Japan and China’s trade figures.
