Markets Overview
- ASX SPI 200 futures down 0.6% to 7,772.00
- Dow Average down 1.2% to 37,983.24
- Aussie down 1.1% to 0.6468 per US$
- US 10-year yield fell 6.6bps to 4.5216%
- Australia 3-year bond yield rose 1.8 bps to 3.85%
- Australia 10-year bond yield rose 1 bp to 4.27%
- Gold spot down 1.2% to $2,344.37
- Brent futures up 0.8% to $90.45/bbl
Economic Events
The financial world was roiled by a flare-up in geopolitical risks that sent stocks sliding — while spurring a flight to the safest corners of the market such as bonds and the dollar. Oil rose.
Equities saw their worst day since January after a news report that Israel was bracing for an attack by Iran on government targets. Approximately 40 launches were identified crossing from Lebanese territory, some of which were intercepted, the Israel Defense Forces wrote in a post on X. US President Joe Biden said he expects Iran will attack Israel sooner rather than later — and his message to Iran is “don’t” do it.
Wall Street’s “fear gauge” — the VIX — spiked to levels last seen in October. The S&P 500 fell 1.5% Friday, with banks and chipmakers leading losses. The gauge posted its biggest weekly drop in 2024. Treasury 10-year yields sank seven basis points to 4.52%. Andrew Brenner at NatAlliance Securities also cited “massive short covering” and rate locking before an expected flurry of debt issuance by banks after earnings.
The dollar notched its best week since September 2022. Brent oil settled above $90. Gold topped the $2,400-an-ounce mark before erasing gains.
Treasuries rallied sharply, following the market’s worst two days since February, in which yields reached year-to-date highs after inflation readings savaged expectations for Federal Reserve interest-rate cuts this year. Two-year yields — which briefly topped 5% this week — plunged on Friday.
Other News
Airlines are weighing an ever narrowing set of options to fly between Europe and Asia after grappling with airspace shutdowns in the wake of the first direct Iranian attack on Israel from its soil.
Several Middle Eastern countries including Jordan, Iraq and Lebanon temporarily closed their airspace as Iran launched drones and missiles. Both Israel and Iran also imposed restrictions on airline traffic over theirs.
A number of airlines are rerouting or avoiding trouble spots in a series of decisions that will prolong flight times and add to fuel costs. They include Qantas Airways Ltd., Singapore Airlines Ltd. and Deutsche Lufthansa AG.
Qatar Airways and Emirates resumed some suspended Middle Eastern services on Sunday as airspaces reopened.
Iran’s airspace is frequently utilized by airlines traveling between Europe and India or Southeast Asia. Airspace across the Middle East are littered with risks and complexities. Airlines are contending with a set of challenges after Russia’s invasion of Ukraine severed access for many carriers forcing lengthy diversions which exist to this day.
Earlier in Israel’s war against Hamas in Gaza, airlines faced scores of disruptions primarily centered on Tel Aviv, cancelling flights into or out of the country.
Israel shut down its airspace for both domestic and international routes on Saturday, before reopening them Sunday morning. Lebanon and Iraq too resumed flights over their territories.
The latest diversions come as Israel and its allies, led by the US, fended off Iran’s response to a suspected Israeli attack on Iran’s embassy in Syria on April 1, which killed a top military commander. Iran said on Saturday its forces seized an Israel-linked container ship near the Strait of Hormuz.
Days earlier, Lufthansa Group suspended flights to several cities in the Middle East. The group — whose airlines include Germany’s flag carrier Lufthansa, Austrian Airlines and Swiss International Air Lines — said Sunday that it will resume flights to Tel Aviv, Erbil in Iraq and Amman on Tuesday, while those to Beirut and Tehran will continue to be halted until at least April 18.
Qantas had temporarily adjusted its direct Perth-London flights to stop over in Singapore to account for the extra fuel needed to re-route around the volatile region.
Singapore Air said that its flights were not overflying Iranian airspace. Cathay Pacific Ltd. is watching the situation in the Middle East closely, but its operations remain normal, a spokesman said in a text message Sunday.
(Bloomberg)
