Stocks Gain, Dollar Wobbles as Trump Extends Iran Ceasefire

Stocks gain as Trump extends Iran ceasefire

Market Reactions to Trump’s Iran Ceasefire Extension

By Ankur Banerjee

SINGAPORE, April 22 (Reuters) - U.S. stock futures rose and the dollar wavered on Wednesday after President Donald Trump said he would indefinitely extend the Iran ceasefire, keeping sentiment buoyed, although with the Strait of Hormuz still closed, oil prices stayed near $100.

Trump's announcement appeared to be unilateral, and it was not immediately clear whether Iran, or U.S. ally Israel, would agree to extend the ceasefire, which began two weeks ago.

Markets took the latest development in stride as investors weighed the extension with no signs of resumption in talks yet. Iran had rejected a second round of negotiations before Trump's announcement.

Stock and Futures Performance

S&P futures rose 0.6% while Nasdaq futures gained 0.7% in Asian hours. European futures eased 0.2% pointing to a subdued open.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5% after hitting a seven-week top on Tuesday. Japan's Nikkei surged to a record high.

Analyst Insights

Thomas Mathews, head of markets for Asia-Pacific at Capital Economics, said the earlier ceasefire was widely seen as indefinite so it was not surprising the latest announcement had not moved markets much.

"Obviously, any news on the re-opening of the Strait is a good candidate for the next big market flashpoint," Mathews added.

Strait of Hormuz and Oil Prices

Hormuz Remains Key

After a sharp selloff in March due to war in the Middle East, markets across the globe have swiftly rebounded this month and are back at pre-war levels as the prospect of a peace deal and the ceasefire spurred a risk-on rally.

That has also left the U.S. dollar, which benefited from safe haven demand in March, on the back foot, giving up most of its war-induced gains.

"It appears markets were right to assume peak war uncertainty is behind us," said Matt Simpson, a senior market analyst at StoneX. "Risk seems likely to remain buoyant and dips viewed favourably by equity bulls. The closure of the Strait of Hormuz is already priced in."

Energy Supply and Market Volatility

Trump said he would continue the U.S. Navy's blockade of Iran's ports and shores. Tehran has effectively closed the Strait of Hormuz through which one-fifth of the world's energy supply usually flows, causing a global energy shock.

Oil prices swung between gains and losses in early trading, with Brent crude futures down 0.17% at $98.27 per barrel. U.S. West Texas Intermediate crude futures slipped 0.42% to $89.29 a barrel. [O/R]

While oil prices have come down from their March peaks they are still well above pre-war levels, worrying investors that elevated energy prices could quicken inflation and keep global rates higher for longer.

"We expect markets to remain volatile for now given the uncertainty with Hormuz and because the duration and scale of the crisis remain unclear," said Vasu Menon, managing director of investment strategy at OCBC.

Federal Reserve and Economic Data

Warsh Senate Appearance

Investors parsed comments from Federal Reserve chief nominee Kevin Warsh as he tried to assure U.S. senators considering his confirmation to lead the central bank that he ​would act independently of the White House.

Warsh said he had made no promises to Trump about cutting rates and called for a new approach to controlling inflation and a communications overhaul that could discourage his colleagues from saying too much about the direction of monetary policy.

U.S. Retail Sales and Currency Movements

Separately, data on Tuesday showed U.S. retail sales rose more than expected in March as the war with Iran boosted gasoline prices and led to a record surge in receipts at service stations, while tax refunds underpinned spending elsewhere.

The currency market was fairly muted in Asian hours. The euro last fetched $1.1744. The yen was at 159.27 per dollar and sterling firmed to $1.351. [FRX/]

The dollar index, which measures the U.S. currency against six peers, was last at 98.35, hovering near its highest in a week. Still, the index is down 1.5% in April after rising about 2.3% in March.

(Reporting by Ankur Banerjee in Singapore; Editing by Christopher Cushing and Jacqueline Wong)