New york: Global markets are keenly focused on the Federal Reserve's upcoming policy decision at its March meeting, along with Fed Chair Jerome Powell's guidance on Wednesday. This comes as markets show signs of recovery spurred by optimism that the ongoing Middle East conflict may soon ease.
According to Anadolu Agency, tensions in the Middle East, intensified by joint US and Israeli military actions against Iran and Tehran's retaliatory measures, continue to pose a threat to the global economy, particularly impacting oil supply. The enduring conflict's potential long-term economic repercussions remain uncertain, though some believe tensions could soon dissipate.
Global energy costs have surged, exerting upward pressure on global inflation risks, largely due to the targeting of oil facilities within the conflict zone and the effective closure of the Strait of Hormuz, a crucial passage for oil shipments. Rising inflation risks are complicating future policy roadmaps for central banks.
The Federal Reserve is widely anticipated to maintain its policy rate, with its quarterly dot plot expected to offer insights into the decision and timing of future policy actions. Despite US President Donald Trump's call for monitoring the Strait of Hormuz for maritime safety, the expected response was not achieved, leading to an increase in oil prices.
On Tuesday, Brent crude closed at $100.9 per barrel, marking a 2.9% increase, while on Wednesday, it traded at $98.2, reflecting a 2.6% decrease. In a positive development, Iraqi Oil Minister Hayyan Abdul Ghani announced a deal between Baghdad and Erbil to resume oil exports starting Thursday, which eased some supply-side risks in the market and reduced upward pressure on prices.
Consequently, the US 10-Year bond yield fell by 3 basis points on Tuesday to 4.2%, standing at 4.18% on Wednesday. The US Dollar Index has continued its decline for a second consecutive day, trading just above its previous close at 99.5 on Wednesday. Gold prices are under pressure amid weakening rate-cut expectations and ongoing Middle East tensions, with prices extending their decline into a fifth trading day, trading at $4,989 per ounce on Wednesday, down 0.3%.
Airlines have adjusted their first-quarter revenue estimates upward amid strong demand, despite the rising cost of jet fuel. Delta shares rose by 6.5%, while American Airlines saw a gain of 3.5%. Reflecting these developments, the S and P 500 rose 0.25%, the Nasdaq 0.47%, and the Dow Jones 0.1% on Tuesday, with a positive start on Wednesday.
In Europe, investors are eyeing the eurozone's February inflation data set to be released on Wednesday. The eurozone's consumer price index (CPI) is expected to rise 0.7% month-on-month and 1.9% year-on-year in February. The European Central Bank (ECB) and the Bank of England (BoE) are both anticipated to maintain their rates in policy decisions scheduled for Thursday.
European Commission President Ursula von der Leyen held a telephone conversation with Iraqi Premier Mohammed Shia al-Sudani, discussing regional security. She praised his efforts to promote restraint during turbulent times and extended condolences for those affected by attacks on Iraqi territory. She reaffirmed the EU's commitment to supporting Iraq's stability and sovereignty while working to ease regional tensions.
European markets experienced gains on Tuesday, with the FTSE 100 climbing 0.33%, the FTSE MIB 30 rising 1.22%, the CAC 40 increasing 0.49%, and the DAX 40 gaining 0.71%, all starting Wednesday on a positive note.
In Asia, markets were mostly bullish, except in China, as the limited slowdown in oil prices and reports that Iran will not block passage for some countries in the Strait of Hormuz alleviated some risks to energy costs in the region. Japan reported a foreign trade surplus of $340 million in February on Wednesday, defying estimates, despite recording a trade deficit of $7.2 billion.
US chip giant Nvidia announced plans to resume AI chip production in China, boosting risk appetite in the region. Tech giants across the continent saw share price increases, with South Korea's SK Hynix shares climbing 5%, Samsung Electronics gaining over 6%, and Japanese firms Aoi Electronics, Tokyo Electron, and Satori Electric witnessing rises of 4.4%, 3.3%, and 1%, respectively. The Nikkei 225 rose 2.9%, the Hang Seng Index 0.1%, the Kospi Index 4%, and the Shanghai Composite Index 0.3%.