ORLANDO, Florida, March 5 (Reuters) – Stocks sank on Thursday and another surge in oil prices sent bond yields shooting higher, as the spiraling conflict across the Middle East raised investor fears over energy supplies, higher inflation and slower growth.
More on that below. In my column today I offer a reminder that, amid the fog of war, economic fundamentals can’t be forgotten completely. Friday’s U.S. payrolls data, and any hint of AI’s impact on jobs, will avert eyes from the Middle East, at least temporarily.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Today’s Key Market Moves
Today’s Talking Points
* Learning the “transitory” lesson
As energy prices soar, markets are betting that central bankers won’t repeat the 2021-2022 playbook of looking through supply shocks and a subsequent surge in “transitory” inflation. They’ve learned that lesson, right?
That appears to be traders’ bet – only one Fed rate cut this year is baked in now, and that’s not until October; another BoE cut isn’t fully priced at all; the ECB is more likely to hike than cut; and the RBA could even hike again this month.
* No room for complacency
There was a glimmer of hope on Wednesday that back-channel U.S.-Iran diplomacy might pave the way for peace to break out in the Middle East. Traders seized upon it, bought back beaten-down stocks, and Europe and Wall Street rallied.
Predictions are dangerous at the best of times, but that looks like a false dawn. The war is spreading, messy, and getting more entrenched. Energy prices and bond yields are spiking, and risk assets are feeling the heat. Yet the Nasdaq is flat on the week. Justified calm, or complacency?
* A job lot
With investors’ focus firmly on the market implications of events in the Middle East, economic fundamentals are understandably taking a back seat. They should be a driving force, however, at 8:30 a.m. Eastern Time on Friday, when the U.S. Bureau of Labor Statistics releases the February jobs data.
A strong report will let Fed officials breathe more easily, while signs of cracks in the labor market will be tricky to navigate – yields are spiking on the energy supply shock, yet the curve is the flattest this year. Stagflation on the horizon?
What could move markets tomorrow?
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever; Editing by Nia Williams)
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