Gold and Oil prices fluctuate on speculation of Iran attack

• European sheltered from much of the US tech sell-off.
• Earnings in focus, with Home Depot and Workday due.
• Gold and oil prices fluctuate on speculation of Iran attack.

A downbeat start in Europe, although the scale of those losses once again provide outperformance compared with their US counterparts after a fresh wave of selling pressure hit all three of the major US indices. Once again, traders are concerned with the degree to which AI will disrupt rather than enhance corporate profitability and overall levels of employment, with online discourse developing around what the future may look like in just a few years. For Europe, perhaps the saving grace is the lack of a significant tech or software weighting to their stockmarkets, although we are seeing the financials come under pressure this morning. Part of that weakness will come from the notion of potential margin destruction as AI makes the lending landscape more competitive, seeking and switching to the best deals to make a more efficient borrowing process for consumers. However, there is also the fear around a prospective rise in unemployment that could be around the corner as AI takes white collar roles, dampening economic activity and increasing the chance of bad loans in their portfolio. 

A light economic calendar means traders are likely to feed off the ongoing narratives around AI, Iran, tariffs, and earnings. From the earnings perspective, today brings data from Home Depot and Workday in particular. In a week that undoubtedly has the software and tech space in the limelight, it can be easy to miss out on the fact that we also see a handful of interesting high-street names such as Home Depot, TJX, and Lowe’s report between today and tomorrow. This provides a key insight into the health of the consumer at a time of employment and AI uncertainty. Coming off the back of yet another shift in the tariff rates, we will be watching for any commentary over whether the new 15% blanket rate helps or hinders the margins at Home Depot. On the software-front, any hope that Workday will enjoy a sharp rebound off the back of strong earnings should perhaps be tempered. However, it does provide a timely opportunity for the CEO to lay out exactly why this current selloff is ill-founded. One thing is for sure, investors will be looking for signs that the business plans to leverage the new technology rather than wait for it to consume them.

Looking ahead, much of this week will be dominated by the question of whether we will see the US launch an attack on Iran, with their military in positioned to a great expense. The notion that this is simply a case of playing the strongest hand possible to force Iran into a highly one-sided deal could yet play out as the truth. After-all, we have seen Trump use that trick over and over when it comes to trade. However, in an environment where Trump wants to control particular spheres of influence, the fact that Iran has had such a profound anti-American and volatile influence on much of the Middle East would undoubtedly provide an incentive to seek real change. Would the US move those military assets without speaking to Iran at the same time to avoid a pre-emptive attack? Are the negotiations simply a smokescreen aimed at affording them enough time to plan and position accordingly? One thing is for sure. The commodity space in particular is positioned around the likeliness of an attack, with the likes of gold and oil expected to see significant gains should Trump opt to launch military operations in the second-biggest country in the Middle East.