The US government claims it can fund two wars abroad while its fiscal position weakens. Treasury Secretary Yellen stated in her latest interview that the economy is doing well despite high inflation and debt. However, many Americans feel the US should focus domestically as poverty rises, though Yellen insists supporting Israel is unconditional. If oil prices spike from the Middle East conflict, it could worsen inflation and prompt higher interest rates. Yellen blames House Republicans for hampering vital aid to Israel and Ukraine by not electing a speaker. She also touts increased IRS funding to audit Americans more and collect trillions in unpaid taxes.
EQUITY
Stronger retail sales raised concerns about rate hikes that saw the stock index open lower as rising Treasury rates deprived upside momentum. The Bank of America's earnings were better compared to Goldman's, and defence powerhouse Lockheed rose despite aircraft delays due to recent conflict. Tech fell as chip sanctions spread, while Tesla has been asked to recall its 2021–2023 Model X.
GOLD
Gold prices rallied as Gaza hospital bombings escalated the Israel-Gaza conflict, igniting safe-haven inflows despite robust US data that previously battered the precious metal on higher-for-longer rate views. However, while geopolitical premiums and bullish technical momentum energise the yellow metal, stagflation risks from pricier oil and impending Fed speeches could cap substantial gains.
OIL
Volatility prevailed in crude markets as geopolitical tensions escalated between Israel and Gaza, hindering diplomatic de-escalation efforts and prompting risk premiums, while robust economic data and projected seasonal demand upticks vied with looming recessionary pressures. Though potential Venezuela sanctions relief and Saudi spare capacity offers ease, overall tight fundamentals persisted. The latest inventory draws signal steady exports and consumption during peak maintenance season.
CURRENCY
Dollar steadied as stronger-than-expected Chinese GDP and US retail sales stirred conflicting implications for monetary policies. Speeches by Fed officials this week kept investors guessing rate hike odds, while in the UK, despite lower CPI assuaging BOE hike bets, policymakers emphasized more tightening is needed, sending the pound consolidating. Loonie and kiwi dipped as slowing inflation trimmed bets of further hikes from Canada and New Zealand’s central banks.
