U.S. Equity Markets fell as investors remained wary of an escalation in tensions with Iran. The US Dollar advanced, while oil continued its retreat from multi-month highs. The S&P 500 dropped for the second time in three sessions, with investors cautious after Iran threatened a military response to a U.S. airstrike that killed a top general four days ago. Chipmakers buoyed the benchmark. Havens showed little reaction to the bellicose Iranian rhetoric, with West Texas crude falling below $63 a barrel and gold slightly higher. The US Dollar advanced versus the yen, while the 10-year Treasury yield rose to 1.82% after indicators pointed to a resilient U.S. economy. Just before 11 pm all changed as Iran fired more than a dozen missiles at U.S.-Iraqi airbases, a direct attack on American forces in the region that risks further action from President Donald Trump after a U.S. air strike killed top Iranian general Qassem Soleimani last week. The elite Islamic Revolutionary Guard Corps claimed responsibility for the barrage, which the Pentagon said was launched from Iran. Fifteen missiles were fired, 10 of which hit the Ayn al-Asad base in western Iraq and another facility in Erbil, according to two U.S. officials. Another struck the Taji air base near Baghdad while four fell out of the sky. Stocks dropped and Oil rose on news of the Iranian strike, though crude later pared its gains. The big question is the extent of any U.S. casualties, because that is likely to influence the White House thinking on potential retaliation. For now it is not clear if there were any fatalities and the Pentagon said the bases had already been on high alert.
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Equities
Some sort of response had been expected to the killing of Soleimani, who ran Iran’s proxy operations across the Middle East and was close to the country’s leaders. While Tehran does not want outright war with the U.S., there was growing pressure at home to react. The balancing act was to do so without tipping things into a conflict that no-one has appetite for. Iranian Foreign Minister Mohammad Javad Zarif said on Twitter the government “concluded proportionate measures in self-defense” after the Soleimani strike. “We do not seek escalation or war, but will defend ourselves against any aggression,” Zarif wrote. In Tehran the mood early Wednesday was cautious, with ordinary people taking to Twitter to voice their fears of a war.
The S&P 500 Index fell 0.3% to close at 3237. Overnight the S&P hit a low of 3181 after Iran’s retaliation before rebounding to near unchanged.
The Stoxx Europe 600 Index gained 0.3%.
The U.K.‘s FTSE 100 Index was little changed.
The MSCI Asia Pacific Index climbed 0.9%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index increased 0.3%.
The Euro declined 0.5% to $1.1147.
The British Pound fell 0.4% to $1.3119.
The Japanese Yen decreased 0.2% to 108.53 per dollar.
Bonds
The yield on 10-year Treasuries rose two basis points to 1.82%.
Germany’s 10-year yield gained less than one basis point to -0.29%.
Britain’s 10-year yield added two basis points to 0.792%.
Commodities
Oil prices jumped back above $70 a barrel after Iran attacked two U.S.-Iraqi bases in its first response to the killing of its top general, before paring much of their advance as Tehran signaled the strike was over.
Futures in London initially surged more than 5% as the Islamic Revolutionary Guard Corps claimed responsibility for the missile strikes, which the Pentagon said were launched from Iran. Prices then pulled back after the country’s foreign minister said it had “concluded proportionate measures in self-defense” and U.S. President Donald Trump tweeted that “all is well” following the attacks. Brent crude rose as much as $3.48 to $71.75 a barrel before trading 0.9% higher at $68.85 on the ICE Futures Europe exchange as of 7:26 a.m. in London. West Texas Intermediate climbed as much as $2.95, or 4.7%, to $65.65 on the New York Mercantile Exchange, later retreating to $63.12.
West Texas Intermediate crude dipped 1% to $62.63 a barrel but is now trading higher at $63.21 as I go to press.
Gold rose 0.3% at $1,574.00 an ounce. However, after the attack we spiked to an overnight high of $1610 before drifting off to currently trade at $1588.
This morning on the Economic Front we already had the release of German Factory Orders which came in weaker than the +0.3% expected with a fall of 1.3%. At 8.30 am we have UK Halifax House Price Index. This is followed at 10.00 am by Euro-Zone Economic Sentiment Indicator, Business Climate and Consumer Confidence. Next, we have U.S MBA Mortgage Applications at 12.00 pm and the ADP Employment Change at 1.15 pm. Finally, at 3.00 pm we have a speech from Fed Member Brainard.
March S&P 500
Risk assets tumbled and havens soared in the immediate reaction to the U.S. killing of Iranian General Qassem Soleimani, but the moves faded by Monday. A similar pattern occurred overnight, with a risk-off wave following Iran’s strike on two U.S. targets in Iraq that then eased as Tehran stressed that it wasn’t seeking war. As the S&P re-opened below my buy range before trading to a low of 3181 I did not buy the market myself as we made a small ‘’V’’ bottom with the market currently rebounding to near unchanged as we sit at 3230 as yet again anyone with the nerve to buy the dip is well rewarded. Since last Thursday I have said that as long as the S&P does not close below 3195 then we are going to eventually hit my 3310/3350 target area before we may see at least a decent correction. Given the increased volatility I am only trading in small size. Today I will again look to buy the S&P on any dip lower to 3200/3215 with a 3188 wider stop. My sell range will remain unchanged from 3262/3277 with the same 3284 higher stop. I will also be an aggressive seller from 3310/3350 with the same 3370 stop.
EUR/USD
After the Euro traded lower to my 1.1140 buy level I covered this position at my revised 1.1145 T/P level and I am now flat. The Euro hit an overnight high of 1.1163 and today I will again look to buy the market from 1.1060/1.1110 with a 1.1025 lower stop.
March Dollar Index
No Change as I am still a seller on any rally higher to 96.90/97.35 with a higher 97.65 tight stop.
March DAX
As regular members known that the DAX Futures Market closes at 9.00 pm and does not re-open until 7.00 am. This morning the DAX opened near the bottom of yesterday’s buy range at 13085 before rallying to my revised 13135 T/P level as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the DAX on any dip lower to 12970/13030 with a 12915 stop.
March FTSE
The FTSE never got close to my sell range before getting hit hard and I am still flat. The FTSE has short-term support from 7390/7440 and I will be a buyer in this area with a 7345 stop.
Dow Rolling Contract
Just like the S&P above the Dow also opened below my buy range to hit an overnight low of 28120 before rebounding over 350 points to sit at 28470 as I go to press. Anyone who did buy the market after the Iranian missile attack is sitting on a nice gain this morning. The ‘’buy the dip’’ continues to pay dividends and today I will again look to buy the Dow from 28120/28270 with a lower 27995 stop.
March NASDAQ
The good news was the fact that the NASDAQ opened well below my 8830 T/P level and I was able to cover my latest 8865 short position at a price of 8770 and I am now flat. Incredibly the NASDAQ traded to an overnight low of 8680 before rebounding to sit at 8820 as I go to press. Today I will be an aggressive buyer from 8645/8695 with a 8580 stop. I will also be a small seller on any further rally to 8895/8955 with a 9005 stop.
March BUND
No Change as I am still a buyer on any dip lower to 171.10/171.60 with a 170.75 stop.
Gold Rolling Contract
Gold missed my 1552 buy level before trading to a new six- year high overnight at 1610. I am still flat and today I raise my buy level to 1555/1568 with a 1548 stop.
Silver Rolling Contract
Unfortunately I covered my latest 18.10 long Silver position too early at 18.24 and I am now flat. Overnight Silver reached to a high of 18.80 before selling off to sit at 18.40 as I go to press. Today I will again look to buy the market from 17.80/18.20 with a 17.45 stop.
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