Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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A decisive risk-off movement swept through financial markets on Thursday, as developments in the Middle East pushed crude oil prices back into three-figure territory. The US military has concluded its 13th consecutive night of strikes against the Iranian regime; neighbouring countries have reported retaliatory missile and drone attacks originating from Iran; Yemen’s Houthi rebels have targeted Saudi ships in the Red Sea and fears continue to grow that the attacks may escalate to a wider regional conflict. The Persian Gulf being closed off is bad enough for global trade, but if the Red Sea follows suit, then the world will have lost not one but two vital shipping lanes. Oil markets were certainly shaken, as the Brent Crude benchmark pushed north of $100 for the first time in two months after rising 6% on Thursday, while US oil contracts jumped to $93 per barrel. Meanwhile, in Abu Dhabi, Murban Crude futures exploded higher yesterday, briefly reaching $114 per barrel before settling lower at $108, nevertheless a 20% daily rise for the local benchmark.
The surge in oil prices has spooked markets into more defensive positions as the threat of inflation rears its ugly head once again. Capital flowed away from riskier assets and back into the safe hands of the US dollar, pushing the DXY as high as 101.5 on Thursday. Precious metals suffered, with gold falling 2% and retreating back to $4,050 per ounce, while silver sank back down to the $57 range after shaving more than 3% from its tally. Bitcoin likewise succumbed to the fear, enduring a $1,000 haircut to slump back to $65,000 per coin, dragging the broader crypto markets down with it. US stocks were also hit hard, but more on that later.
The fact of the day in currencies is that the Japanese yen has officially hit a 40-year low against the dollar, with the pair peaking as high as 164 during yesterday’s session. The move has prompted all the usual questions as to when the Bank of Japan will intervene to defend its currency, but the fact is that the central bank has already done so multiple times over the last four years and has failed to achieve anything other than a fleeting respite to the seemingly inevitable decline. The US Treasury said much of the same, claiming that the only answer was for the BoJ to hike rates on the yen, thereby narrowing the interest rate differential even further and limiting the undesirable volatility that has plagued the pair since 2021.
Tesla and Google both reported quarterly earnings after the bell on Wednesday, and shares in both companies shot down the following day. While Google managed to beat estimates, with cloud revenue increasing 82% year-over-year and overall revenue growing by 24%, investors were concerned about the company’s plans to increase capital expenditures this year and the next. It was much the same problem over at Tesla, which is expected to burn $25 billion in capex this year, while the beleaguered car manufacturer also had to justify the additional misfortune of falling short of revenue estimates. Shares in Alphabet (GOOG) fell 7% on Thursday, which was only half the drop incurred by Tesla (TSLA), which plummeted 14.5% over the same time frame, bringing the stock down to a miserable 29% year-to-date loss. Markets are not happy about the colossal amounts of money being thrown at AI infrastructure and Wall Street is becoming less keen on dishing out blank cheques to companies with even the flimsiest of artificial intelligence aspirations. Investors are starting to ask uncomfortable questions regarding return on investment, and so far, many of the big names have not been able to provide satisfactory answers. The worrying earnings reports triggered a wider selloff in the Magnificent Seven, each component of which performed dismally yesterday, dragging the Nasdaq 100 (NDX) down 1.9% when all was said and done. The Nikkei appears to have latched on to the negative momentum this morning, falling 3% within the first hour of the opening bell in Tokyo. Potentially rough day ahead for big tech.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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