Central Banks and Renewed Iran Tensions Drive Mixed Markets

Market action is mixed this morning ahead of today’s Fed interest rate decision and tomorrow’s Bank of England meeting. Neither central bank is expected to change monetary policy this week, but related commentary and voting records may be closely scrutinized for indications of the future direction of interest rates.

Hostilities between Iran and the US resumed overnight, sparking a sharp rebound in energy prices that could potentially put renewed upward pressure on inflation. Longer-term Treasury yields remain elevated, suggesting investors may be anticipating that the next move in interest rates will be upward.

The market response to overnight earnings has also been mixed. Despite both companies beating analyst expectations, Visa shares are down 2.1%, while Ford Motor Company is up 4.9% in premarket trading. There are no major economic reports this morning.

US index futures are pointing toward a mixed open, with NASDAQ futures down 0.1% and Dow Futures down 0.7%. Overseas, the Nikkei fell 1.5% overnight, while the Hang Seng gained 2.0%. In Europe, the DAX and FTSE are both up 0.1%.

Energy contracts have rebounded sharply following the renewed hostilities. Crude Oil is up 6.7%, approaching $85.00/bbl, while Brent Crude is up 7.0%, approaching $90.00/bbl. Gasoline is up 1.5%, approaching $3.40/gallon. Metals are under pressure, with Gold down 0.6% near $4,000/oz, Copper down 1.0% near $6.30/lb, and Silver down 0.5%.

In rates, the US 10-year Treasury note yield is steady near 4.65%, while the US 30-year Treasury note yield is steady near 5.10%. The US Dollar is up slightly today, particularly against metals. The Euro is down 0.1%, while the Loonie is up 0.1%.

Looking ahead, the Fed releases its latest interest rate decision and statement on the economy and monetary policy at 2:00 pm EDT this afternoon. The Bank of England follows Thursday morning, with the Bank of Japan meeting Friday morning. US Q2 GDP comes out Thursday morning, followed by Canada monthly GDP on Friday, while early PMI numbers from the US and China are also due later this week.

Earnings reports continue to roll out, headlined by Microsoft, Canadian Pacific, and Meta Platforms today; Apple and Amazon.com on Thursday; and Chevron, ExxonMobil, Enbridge, Imperial Oil, Magna International, and TransAlta on Friday.

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