The mood in markets is darkening at the moment and I suspect it’s oil that’s the tail wagging the dog.
WTI crude oil is now up $1.33 to $83.74 on the day and at a session high. It was as low as $81.50 earlier but has been bid up strongly in the past hour in a sign that Iran negotiations aren’t going anywhere. There’s a sense of disbelief that we’re in a standoff right now and Iran is talking about escalating.
The gains came as Iran has reportedly seized a UAE-owned tanker in the Strait of Hormuz, Iranian state news agency Fars reported. That’s some backing to the idea that they’re willing to go into an offensive mode.
The US is threatening more economic actions while Iran is threatening more military actions and no one wants to sail in the region.
With the rise in oil and Hormuz risks, US Treasury yields are at the highs of the day, with 10s up 2 bps to 4.72% and 30s hitting 5.30% for the first time since the financial crisis. That’s starting to weigh on equity markets with the S&P 500 down 0.4%, or 29 points.
Some losers include:
- MSFT -3.3%
- META -4.0%
- AMZN -1.6%
- V -1.0%
- TSLA -1.0%
The shape of the selling looks like steady deliveraging to me ahead of what could be some firework in the autumn. Meanwhile, retail continues to pile into memory names with Micron up 4.9%.
This article was written by Adam Button at investinglive.com.