The consequences of tensions in the Middle East are, for the moment, still relatively minimal for the financial markets, like, for example, the price of a barrel which has not reacted excessively. However, Iran's historic attack on Israel could logically raise fears for the worst. Indeed, as we wrote in our last meeting on Monday, if the Iranian attack seemed more "façade" than anything else and to have been carried out taking care to warn the target and its allies, the real The question lay in the Israeli response, the strategic doctrine of the Jewish state being to never leave the last word to the enemy. If Israel followed its doctrine, the response carried out, against the advice of the Americans, was therefore carried out in such a way as to avoid a further escalation of tensions. “The incident” therefore appears to be closed, with the Iranians at the same time minimizing the impact of the Israeli response which had been carefully targeted and measured.
Not enough, however, to give comfort to the heart of the financial markets, which after a good start to the year, are looking for reasons to consolidate. Geopolitical tensions and the recent increase in rates did nothing, so Jerome Powell came to add his (small) grain of salt. After the dovish pivot of December, here is the hawkish pivot of April... The president of the Fed has, in fact, indicated that the recent inflation figures in the United States had not provided the necessary confidence in the return of inflation. inflation towards the 2% target. So “it will probably take longer than expected to reach this level of confidence”. If the latest macroeconomic figures naturally do not prove him wrong, with such a change in discourse in just a few months, especially from the president of the most important central bank, we can legitimately wonder if there is a pilot in the plane as the central bankers give the impression of navigating by sight. The famous “data dependence” has finally become a nice alibi. The publication of American retail sales for the month of March should not provide better visibility. Although being a lagging indicator, they confirmed the resilience of the American economy in the first quarter with consumption remaining solid. Retail sales have, in fact, largely exceeded consensus expectations while the data has been rather poorly oriented in recent months.
Jerome Powell's change of tone has therefore maintained upward pressure on US rates which are now trading at the levels of early November. Relatively immune until now, the stock markets have finally slowed down. It must be said that seeing American equity markets up almost 10% while 10-year rates had recovered 70 bps (+80 bps to date) since their lows at the end of December could seem counterintuitive. On the eve of their results publication, the “Magnificent 7” (Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla) dropped nearly 8% last week. These therefore promise to be crucial for hoping for a rebound in the markets which could, otherwise, correct more strongly.