Markets:
- Gold up $12 to $2390
- US 10-year yields down 8.8 bps to 4.56%
- Nikkei down 2.3%
- CHF leads, AUD lags
- S&P 500 futures down 43 points
It was a dreadfully quiet Asia-Pacific session until about 10 am in Tokyo when reports started to surface of explosions in the Middle East. They were scattered after first, citing Syria and Iraq, then Iran. Several targets were rumored and there was talk of various nuclear sites and the market decided to duck-and-cover.
What was interesting is how slowly the news travelled. We were writing on it and the markets were moving for more than an hour before it hit some mainstream news outlets. As it hit larger and larger sources, the risk mood stepped down. However by the time it made ‘CNN breaking news’ that was the bottom.
By then it started to become clear this was a limited strike and it appears to be only on one site, and perhaps calibrated to minimize casualties and damage but to send a signal. The second positive signal was when Iran began to deny the whole thing never happened and that the sounds were quadracopters being shot down by air defense.
I don’t even think the truth matters here because the message is that Iran doesn’t want to escalate further.
The market was fairly quick to pick up on that — and I’m going to pump my own tires here — and we’ve already given back most of the gains in gold after hitting a record high of $2417. It’s a similar story across the board as more of the moves fade.
You could even argue that risk trades should be higher than pre-attack levels because there was always some change (and a good one) that Isreal would do something. Now that we’ve seen it and Iran’s comments, it’s not a stretch to assume this chapter is closed. Of course, in the Middle East, it never takes long for another chapter to start.