As the war in Iran enters its 12th week, concern about the effects of the war on the real sector is increasing. The concern is not felt much in the US stock market, which broke records with the support of artificial intelligence companies.
1. EVERYTHING IS ON THE TABLE
US President Donald Trump completed his summit with Chinese President Xi Jinping in Beijing today. One analyst said markets would view this summit as “strategically reassuring but lacking in content.”
Next week, finance ministers and central bank officials of the G7 countries will meet in Paris. Every issue will be discussed, from the Iran war to the supply chain security of rare minerals, from the shock in oil prices to the latest fluctuations in the global bond market.
While there are no signs of progress towards ending the war in Iran, the barrel price of oil remains above $100.
Although investors believe that a peace agreement will eventually be reached, the risk of permanent damage to the economy increases with each day that the war continues.
Global bond markets; It is unsettled by a number of factors, including rising inflation, political turmoil and, in particular, a sharp shift in investor expectations regarding the path of interest rates.
2. MOBILITY IN THE WORLD OF CHIP
A strong first quarter for US companies will end next week with the results of chip developer Nvidia as well as retailers such as Walmart.
Artificial intelligence chip developer Nvidia, the world’s largest company in terms of market value, is leading the rise in the US stock market. While the appetite for artificial intelligence drives many stocks of semiconductor companies up, Nvidia will announce its balance sheet next Wednesday.
Investors will be watching the balance sheets of retailers such as Walmart, Home Depot, Target and TJX Cos. to see whether war-triggered inflation is weighing on consumer spending.
According to LSEG IBES, profits of S&P 500 companies are on track to increase by more than 28 percent in the first quarter of the year compared to the same period of the previous year.
3. THE ROCKING PRIME MINISTRY SEAT
UK employment and inflation data to be announced next week may upset politicians and economic management.
But the real focus of the bond market will be on the office of the British prime minister.
Markets are increasingly worried about a rival for Prime Minister Keir Starmer’s seat following the defeat in this month’s local elections.
The massive damage caused by the Iran war to the energy and bond markets and the domestic political uncertainty in the UK make the situation even more difficult. The resignation of Health Minister Wes Streeting on Thursday could spark a leadership race within the party.
Fears of a more left-leaning prime minister have pushed gilt yields higher, fueling concerns about Britain’s fragile financial structure. Britain’s 10-year government bond yields are near an 18-year high.
If there is a sharp increase in inflation, which will be announced next Wednesday, and the markets begin to price that the Bank of England (BoE) will follow a tighter policy this year, the selling wave in bonds may accelerate further.
4. HOW FAR CAN THE SCISSORS BE OPENED?
As Nvidia prepares to announce its first-quarter results next week, investors will be watching to see whether the market reaction will further widen the widening performance gap between the US and European stock markets.
Disruptions in global energy supply have affected European countries, which are dependent on energy imports, more severely than the United States. Moreover, the strong balance sheets of major US technology companies and the gradual weakening of consumer demand in Europe led to this gap widening.
While the S&P 500 index has risen 8.8 percent since the beginning of the year, the STOXX 600 index, which tracks Europe’s largest companies, has risen only 3.3 percent.
The difference between the two indices has become even more pronounced since the start of the Iran war. While the S&P 500 rose 8.3 percent in March and April, STOXX lost 3 percent.
5. SITUATION OF JAPAN AND CHINA
Japan’s first quarter gross domestic product (GDP) data, to be announced next Tuesday, may show the effects of rising energy prices on Japan, which is dependent on oil imports.
Authorities in the region will follow this data closely as they try to balance rising inflation pressures with downside risks to growth.
GDP data will be followed by Japan’s trade and inflation data later in the week. Especially high inflation data may strengthen the possibility of the Bank of Japan (BoJ) increasing interest rates in the near future.
In China, housing prices and retail sales data will be announced next Monday. China, the world’s second-largest economy, continues to remain under pressure from a struggling real estate market and stagnant domestic consumption, although it signals that the overall growth momentum is resilient.
