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| Wall Street hits record high, as Iran tensions send oil price up - as it happened | |
| (about 2 hours later) | |
| A late PS: Barani Krishnan, Senior Commodities Analyst at Investing.com, suggests the White House is caught in two minds over Iran: | |
| “Trump has muddled his response to the Iranian situation, first tweeting that shooting the drone down was a ‘big mistake’, then backtracking in comments to reporters that it was probably the actions of a ‘stupid’ individual general.” | |
| “The president seems to be bending over backwards these days not to add to geopolitical tensions that could send oil up 5-6% in a day like this. With his reelection bid in, low oil, and gas prices at the pump, seems to be Trump’s primary concern. That’s why he’s even suggested being open to making peace with Tehran, despite the continued noises against Iran by some in his administration.” | |
| Boom! Hopes that US interest rates will be cut next month have sent Wall Street to a new all-time closing high. | |
| The S&P 500 has ended the day up 28 points at 2,954, a gain of 0.9%, following yesterday’s dovish performance by the Federal Reserve. | |
| The Dow and the Nasdaq also gained around 0.9%, to finish close to their own highest levels. | |
| BREAKING: The S&P 500 closed at a new record, soaring up to 2,954.19 points. The Dow traded higher as well, surging nearly 250 at the close. https://t.co/cgIDf6TvN7 pic.twitter.com/nEWIU0211X | |
| Predictions that the Fed will deliver on its pledge to act appropriately by cutting borrowing costs at its July meeting have helped investors ignore the threat of military action in the Gulf -- while energy companies obviously benefited from the jump in crude prices. | |
| Goodnight! GW | |
| US oil prices have now posted their biggest one-day gain in five months. | US oil prices have now posted their biggest one-day gain in five months. |
| Donald Trump’s warning that Iran has made a “very big mistake” by shooting down one of America’s RQ-4 Global Hawk surveillance drones has loomed over energy markets today. | Donald Trump’s warning that Iran has made a “very big mistake” by shooting down one of America’s RQ-4 Global Hawk surveillance drones has loomed over energy markets today. |
| Here’s Marketwatch’s take: | Here’s Marketwatch’s take: |
| Language from Trump “has driven up oil as traders fear supply in the Middle East might be squeezed by Washington D.C. potentially taking a tougher stance on the country,” said David Madden, market analyst at CMC Markets. | Language from Trump “has driven up oil as traders fear supply in the Middle East might be squeezed by Washington D.C. potentially taking a tougher stance on the country,” said David Madden, market analyst at CMC Markets. |
| July West Texas Intermediate oil CLN19, +5.80% rose $2.89, or 5.4%, to settle at $56.65 a barrel on the New York Mercantile Exchange. | July West Texas Intermediate oil CLN19, +5.80% rose $2.89, or 5.4%, to settle at $56.65 a barrel on the New York Mercantile Exchange. |
| That was the highest front-month contract finish since late May and biggest one-day dollar and percentage gain since December, according to Dow Jones Market Data. | That was the highest front-month contract finish since late May and biggest one-day dollar and percentage gain since December, according to Dow Jones Market Data. |
| This, however, might be reassuring... | This, however, might be reassuring... |
| Trump: Iran incident could have been someone who was loose and stupid and shot down a drone. | Trump: Iran incident could have been someone who was loose and stupid and shot down a drone. |
| This won’t calm nerves in the oil market: | This won’t calm nerves in the oil market: |
| In response to a shouted press question about any US response to Iran shootdown of a US Navy surveillance drone, @POTUS was seen to mouth the words, "you'll find out." pic.twitter.com/aOmWUw6uOd | In response to a shouted press question about any US response to Iran shootdown of a US Navy surveillance drone, @POTUS was seen to mouth the words, "you'll find out." pic.twitter.com/aOmWUw6uOd |
| Are investors getting carried away by the prospect of a US interest rate cut? | Are investors getting carried away by the prospect of a US interest rate cut? |
| They should remember that central bankers are becoming more cautious because the global economy looks weaker - not really a cause of jubilation. | They should remember that central bankers are becoming more cautious because the global economy looks weaker - not really a cause of jubilation. |
| Fawad Razaqzada of Forex.com reckons the rally could “turn to despair” once markets have digested the situation. | Fawad Razaqzada of Forex.com reckons the rally could “turn to despair” once markets have digested the situation. |
| He points out: | He points out: |
| Rates are being cut because the global economy is, or perceived to be, slowing down amid the escalation of geopolitical risks. With global interest rates already so low, how much of a boost would the economy get from (the promise of) a 25 or 50 basis point reduction in interest rates? | Rates are being cut because the global economy is, or perceived to be, slowing down amid the escalation of geopolitical risks. With global interest rates already so low, how much of a boost would the economy get from (the promise of) a 25 or 50 basis point reduction in interest rates? |
| Granted, it will increase the marginal supply of cheap credit further, but that is not the issue here; it is all about marginal demand, or lack thereof, for cheap loans from consumers and businesses because of the latest or upcoming interest rate cuts. I think the law of diminishing returns apply here. Also, with central banks keeping rates so low for such a long period of time, what will happen if the economy were to deteriorate even further? | Granted, it will increase the marginal supply of cheap credit further, but that is not the issue here; it is all about marginal demand, or lack thereof, for cheap loans from consumers and businesses because of the latest or upcoming interest rate cuts. I think the law of diminishing returns apply here. Also, with central banks keeping rates so low for such a long period of time, what will happen if the economy were to deteriorate even further? |
| Will the Fed and other central banks have any more monetary policy tools left at their disposals then? And what about a situation where we see a sudden economic recovery or a big jump in inflation? Surely in this event, central banks will have to tighten their belts quickly, potentially choking off growth. | Will the Fed and other central banks have any more monetary policy tools left at their disposals then? And what about a situation where we see a sudden economic recovery or a big jump in inflation? Surely in this event, central banks will have to tighten their belts quickly, potentially choking off growth. |
| It’s important to remember that while Washington and Tehran agree that an American spy drone has been shot down by Iranian forces, they don’t agree on where it was flying at the time. | It’s important to remember that while Washington and Tehran agree that an American spy drone has been shot down by Iranian forces, they don’t agree on where it was flying at the time. |
| Iranian media said the aircraft was hit inside Iranian airspace, near Kuh Mobarak, on Iran’s southern coast. | Iranian media said the aircraft was hit inside Iranian airspace, near Kuh Mobarak, on Iran’s southern coast. |
| The US say the Global Hawk drone was flying in international airspace when it was shot down by an Iranian missile over the Strait of Hormuz. | The US say the Global Hawk drone was flying in international airspace when it was shot down by an Iranian missile over the Strait of Hormuz. |
| Navy Captain Bill Urban, a spokesman for U.S. Central Command, insists: | Navy Captain Bill Urban, a spokesman for U.S. Central Command, insists: |
| “Iranian reports that the aircraft was over Iran are false. This was an unprovoked attack on a U.S. surveillance asset in international airspace.” | “Iranian reports that the aircraft was over Iran are false. This was an unprovoked attack on a U.S. surveillance asset in international airspace.” |
| But Ali Shamkhani, secretary for the Supreme National Security Council, is just as adamant that the aircraft had breached Iranian borders, saying: | But Ali Shamkhani, secretary for the Supreme National Security Council, is just as adamant that the aircraft had breached Iranian borders, saying: |
| “We will defend Iran’s airspace and maritime boundaries with all our might. It doesn’t matter which country’s aircraft cross our airspace.” | “We will defend Iran’s airspace and maritime boundaries with all our might. It doesn’t matter which country’s aircraft cross our airspace.” |
| Such talk is raising concerns of military conflict in the Middle East, which would cause oil supply disruption. That’s why oil prices are pushing sharply higher this afternoon: | Such talk is raising concerns of military conflict in the Middle East, which would cause oil supply disruption. That’s why oil prices are pushing sharply higher this afternoon: |
| US crude: up 5.8% at $59.91 per barrel, a three-week high | US crude: up 5.8% at $59.91 per barrel, a three-week high |
| Brent crude: up 4.3% at $64.52 per barrel, also a three week high | Brent crude: up 4.3% at $64.52 per barrel, also a three week high |
| And here’s our latest news story on the incident: | And here’s our latest news story on the incident: |
| Iran shoots down US 'spy' drone | Iran shoots down US 'spy' drone |
| US crude oil is now up nearly 6%, on fears of disruption in the Gulf. | US crude oil is now up nearly 6%, on fears of disruption in the Gulf. |
| US crude continuing to rally - JUN WTI $57.07 +5.8% pic.twitter.com/UhuhucsTjX | US crude continuing to rally - JUN WTI $57.07 +5.8% pic.twitter.com/UhuhucsTjX |
| Neil Wilson of Markets.com says Donald Trump’s “belligerent” tweet accusing Iran of a ‘big mistake’ is driving oil up. | Neil Wilson of Markets.com says Donald Trump’s “belligerent” tweet accusing Iran of a ‘big mistake’ is driving oil up. |
| Oil has extended gains on this response from the White House, which sounds quite belligerent. West Texas Intermediate is up 5% to 56.76, while Brent has broken up above $64. | Oil has extended gains on this response from the White House, which sounds quite belligerent. West Texas Intermediate is up 5% to 56.76, while Brent has broken up above $64. |
| Oil has risen to its best in three weeks and now looks to have moved out of its bottoming formation. | Oil has risen to its best in three weeks and now looks to have moved out of its bottoming formation. |
| Oil prices rally to the day's high after Trump says Iran made a ‘very big mistake #JustIn #Oil #CrudeOil #Crude pic.twitter.com/DyDs8Bik2p | Oil prices rally to the day's high after Trump says Iran made a ‘very big mistake #JustIn #Oil #CrudeOil #Crude pic.twitter.com/DyDs8Bik2p |
| Oil is on track for its biggest daily rally in five months, driven by concerns that the US and Iran could be heading for military conflict. | Oil is on track for its biggest daily rally in five months, driven by concerns that the US and Iran could be heading for military conflict. |
| Oil prices jump to high of the day, up more than 4%, after Trump says Iran made a ‘very big mistake’ https://t.co/WB7OIYeTIH pic.twitter.com/A2ikEjUUq8 | Oil prices jump to high of the day, up more than 4%, after Trump says Iran made a ‘very big mistake’ https://t.co/WB7OIYeTIH pic.twitter.com/A2ikEjUUq8 |
| Newsflash: President Trump has tweeted that Iran made “a very big mistake” by shooting down a US military drone overnight. | Newsflash: President Trump has tweeted that Iran made “a very big mistake” by shooting down a US military drone overnight. |
| Iran made a very big mistake! | Iran made a very big mistake! |
| That has send the oil price soaring even higher. US crude is now up 4.5% today at over $56 per barrel, its highest level since 30 May. | That has send the oil price soaring even higher. US crude is now up 4.5% today at over $56 per barrel, its highest level since 30 May. |
| Nearly every one of the 30 companies on the Dow Jones industrial average are up too. | Nearly every one of the 30 companies on the Dow Jones industrial average are up too. |
| The top riser is Nike (+2.45%), followed by several tech firms including Cisco (+2%) and IBM (+1.7%). | The top riser is Nike (+2.45%), followed by several tech firms including Cisco (+2%) and IBM (+1.7%). |
| JP Morgan, though, is a rare faller - down 0.4%. Lower interest rates aren’t good news for banks, as they erode the profit margin between borrowers and savers. | JP Morgan, though, is a rare faller - down 0.4%. Lower interest rates aren’t good news for banks, as they erode the profit margin between borrowers and savers. |
| #Traders see 100% chance the Fed will cut rates in July#Forex #Fx- Read Full Article: https://t.co/qdSj8e0jjk pic.twitter.com/ooeZ9s272Q | #Traders see 100% chance the Fed will cut rates in July#Forex #Fx- Read Full Article: https://t.co/qdSj8e0jjk pic.twitter.com/ooeZ9s272Q |
| President Donald Trump is excited by today’s Wall Street action: | President Donald Trump is excited by today’s Wall Street action: |
| S&P opens at Record High! | S&P opens at Record High! |
| With the re-election campaign kicking off, the president will use the stock market as proof that he’s doing a good job. | With the re-election campaign kicking off, the president will use the stock market as proof that he’s doing a good job. |
| He’ll also take the credit, pointing to his campaign to force the Federal Reserve to stop raising interest rates and start cutting (as they may do next month). | He’ll also take the credit, pointing to his campaign to force the Federal Reserve to stop raising interest rates and start cutting (as they may do next month). |