Markets:

  • Gold down $8 to $2643
  • WTI crude oil up $2.95 to $77.33
  • US 10-year yields up 4.9 bps to 4.03%
  • S&P 500 down 0.8%
  • JPY leads, NZD lags

The prospect of Israeli retaliatory strikes against Iran continues to weigh on sentiment and lift oil prices. Bonds sold off once again but with 10s rising above 4%, it's shifted from a 'no recession' trade into a 'reflation' trade that isn't so positive for stock markets.

The shape of the rally was odd with the recent drivers in AI and China both strengthen with everything else outside of energy struggling. In FX, it was a classic 'risk off' trade with the yen bid and the US dollar close behind. That pulled AUD/USD down for the third day in four and a three-week low. It's a far cry from what looked like a breakout early last week.

The newsflow was light as eyes are now on Florida and the potential for a massive hurricane in the Tampa Bay area late on Wednesday. The reports of an 'imminent' strike on Iran continued for the fifth day but that's yet to happen. Despite that, oil shorts appear to be scrambling to get out of the way, with crude up strongly for the fourth time in five days and now at a six-week high.

The Fed calendar was busy but there was nothing consequential or insightful. Instead, the market is being guided by the data with the odds of no move in November up to 15%.

FX news wrap d