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Israel Retaliates: Stock Markets Decline

INVESTINGIsrael Retaliates: Stock Markets Decline

Israel has decided to retaliate by attacking a military site in Iran. Today, European stock markets are seeing dynamic losses. The WIG20 index is down by 0.75%, and the WIG index has dropped by nearly 0.5%. The German DAX is nearly 1% under the line. The Polish złoty has been under downward pressure since the morning. Gold rose to a level of $2416 before declining towards $2385. The ‘fear index’ has risen above 21 points, reaching its highest level since October 2023. Yesterday’s session on Wall Street ended negatively despite a modest increase in the Dow Jones index by 0.1%. The Nasdaq Composite finished the day down by 0.5% and the S&P 500 closed with a result of -0.2%.

Currently, there is an increased aversion to risk due to Israel’s retaliation against Iran following earlier weekend drone attacks. Morning events do not suggest that today’s session will be marked in green. So far, European stock markets are losing, continuing the trend of the last several days. The correction on the indices is deepening. The dollar, in the early morning hours, again confirmed its role as a “safe haven,” gaining strength. The złoty initially lost but currently, we observe a return of the EUR/PLN and USD/PLN pairs to levels close to yesterday’s close. The fact that the market is in a risk-off mode is also evidenced by the rise in gold prices above $2415 (although the current morning movement has largely been leveled off).

Returning to yesterday’s events, the market received a new set of comments from Federal Reserve representatives. Mester, Williams, and Bostic spoke about current and future monetary policy. The general sentiment is that interest rates in the USA will remain at an elevated level for longer, and none of the opinions even slightly suggested that there would be a change in monetary policy parameters in June. The dollar gained in the second part of the day, resulting in lower levels of the EUR/USD exchange rate.

Weekly data from the U.S. labor market still indicates that it is in good condition. The number of applications stood at 212,000, the same as previously and slightly lower than the expected 215,000. Meanwhile, sales of existing homes fell by 4.3% month-over-month in March, totaling 4.12 million. The scale of new constructions has also decreased. There is a cooling of demand in the real estate market, partly due to higher interest rates on loans.

Today’s macroeconomic calendar is sparse. This morning, we only learned about producer prices in Germany and retail sales in the UK. Overnight, Japan presented consumer inflation data.

Łukasz Zembik, Oanda TMS Brokers

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