Risk sentiment surged on Thursday after Trump cancelled planned strikes on Iran, citing a near-complete deal with Tehran and a possible signing in Europe this weekend. Equities rallied hard, led by cyclicals and tech, while energy was the lone sector in the red. Oracle bucked the broader rally, sliding over 8% on its USD 40bln equity raise following weak capex guidance.
Crude bore the brunt of the de-escalation, reversing earlier gains to settle sharply lower, which in turn fuelled a broad Treasury rally. Yields fell 8-10bps across the curve, led by the belly, as traders unwound inflation premiums tied to the conflict. Markets now price just 18.5bps of hikes by year-end, a 74% chance.
The USD softened broadly on the improved risk tone, with AUD and NZD outperforming on the constructive backdrop, while CAD lagged on crude’s slide.
US PPI added a wrinkle: headline rose 1.1% m/m (exp. +0.7%, prior +1.4%) and 6.5% y/y (exp. +6.4%), but core cooled to 4.9% y/y (exp. +5.3%, prior +5.2%). Supercore reaccelerated to 5.1% y/y, a reminder underlying pressures haven’t fully faded. Jobless claims ticked up to 229k (exp. 219k, prior 225k).
A weak 30-year auction, tailing 1.2bps with soft indirect demand, underscored lingering caution on duration even with yields near 5%. Iran’s Supreme Leader sign-off remains the key swing factor heading into the weekend.
Another deal, this time for sure?
