ON DECK FOR FRIDAY, JUNE 13
KEY POINTS:
- Markets on tenterhooks amid unfolding events…
- …as Israel’s attacks on Iran are ongoing…
- …and Iran pledges retaliation against US and Israel
- Trump’s foreign policy is in tatters
- Peru’s central bank held
- UMich sentiment will be stale on arrival
- Canada refreshes estimates for lower tier data
The superstitious among you might be saying ‘I told you so’ this morning, given what the role the day plays at least in western culture. Israel’s ongoing attacks on Iran’s nuclear sites, its military leadership, and its scientists are having limited effects on financial markets outside of oil that is up by nearly 8–9% partly given the amount of oil output that is directly (chart 1) and indirectly vulnerable. Markets are functioning well amid modest risk-off price discovery. Stocks are broadly lower by about 1% across major benchmarks with resource-heavy benchmarks like the TSX falling by a little less. Sovereign bond yields are up across Europe by low single digit amounts across maturities while US Ts are mildly outperforming. The dollar is playing its traditional role as a safe haven. Gold is up by around US$30/oz.
Many would agree that the Iranian regime should not possess the capability to make a nuclear bomb and that its actions appeared to be on the path toward having enough enriched uranium to do so within a short time period as it dragged out negotiations with the US.
The knock-on effects of the ongoing attacks will be monitored throughout the coming days; Israel just minutes ago launched further strikes. Iran has threatened the US. Trump’s foreign policy is in tatters in Ukraine and the Middle East. It would be a huge escalation if Iran did strike Americans or American assets in the region.
OTHER DEVELOPMENTS
Peru’s central bank held its reference rate unchanged at 4.5% last evening, as expected by all. Data dependent guidance and slight downward revisions to nearer term inflation projections offered a thinly dovish slant.
Light data is on tap with most of the emphasis on US UMich sentiment (chart 2) and components like inflation expectations that are superseded by this morning’s developments that will hit US energy prices (10amET).
Canada releases revised estimates to initial flash readings for manufacturing and wholesale sales that recorded declines in April (8:30amET).
Also hanging over markets is a heavy line-up of developments next week. Should conflict spread, it could upend the G7+ Summit in Alberta, Canada particularly if some participants pull out. A large number of central banks will be weighing in with decisions including heavy-hitters like the Fed, BoJ, and BoE.
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