Risk sentiment under pressure as Oil breaks higher

Frank Walbaum

Important News this week

Wed, 02nd, 04:00 CET NZ RBNZ Rate Decision.

Wed, 02nd, 15:45 CET CA BoC Rate Statement.

Fri, 04th, 14:30 CET US Nonfarm Payrolls.

Fri, 04th, 14:30 CET CA Unemployment Rate.

Risk sentiment under pressure as Oil breaks higher

Risk sentiment is deteriorating as renewed US-Iran attacks increase geopolitical uncertainty. Oil is reacting sharply higher, with a breakout above the $90 level now taking place. Higher energy prices could increasingly hurt demand and raise inflation concerns, adding another headwind for equities.

The S&P 500 has fallen below the 7,650 support level, while the Dow Jones and DAX are also moving lower. If the S&P remains below 7,650, further downside and broader profit-taking could follow.

Crypto remains surprisingly resilient despite Dollar strength and weaker equities. Bitcoin is still holding up, suggesting that risk appetite has not disappeared completely. The New Zealand Dollar is weaker after the RBNZ rate hike, showing that higher rates alone are not necessarily supporting the Kiwi in the current risk-off environment.

Market talk

Markets could be entering a tougher phase. The combination of geopolitical tensions, higher oil prices and weakening equities creates a less favourable environment for risk assets. The oil breakout above $90 is particularly important because sustained higher energy prices can put pressure on both consumers and companies while simultaneously keeping inflation expectations elevated.

The next key signal will be whether the S&P 500 can reclaim 7,650. If not, the correction could gain momentum and pull the Dow, DAX and eventually crypto lower as well. For now, crypto is providing an interesting exception, but the broader market backdrop is clearly becoming more defensive.

Tendencies in the markets

Equities correcting, USD stronger, crypto positive, oil stronger, metals weaker, JPY stronger.

Author

Frank Walbaum

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