Stocks dip as oil prices continue pullback on hopes of US-Iran peace deal
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May 7 : U.S. and European stocks dipped on Thursday while oil prices slid again on optimism for a U.S.-Iran peace deal, even as the fate of the critical Strait of Hormuz appeared unresolved.
On Wall Street, major stock indexes pulled back slightly from the previous session's multiple records on strong chipmaker earnings. The S&P 500 fell 0.3 per cent, the Nasdaq Composite was little changed, and the Dow Jones Industrial Average dipped 0.5 per cent.
The United States and Iran are edging toward a limited, temporary agreement to halt their war, sources and officials said on Thursday, with a draft framework that would stop the fighting but leave the most contentious issues unresolved.
Europe's STOXX 600 was 1.1 per cent lower, having jumped 2.2 per cent on Wednesday, while MSCI's broadest index of Asia-Pacific shares outside Japan hit a fresh all-time high. It was last up 1.6 per cent. Japan's Nikkei crossed 62,000 for the first time as trading resumed after an extended holiday weekend.
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While the Middle East situation was uncertain, "the momentum is going in a good direction" and markets had taken note of it, Lombard Odier chief economist Samy Chaar said.
"So the oil price is down from its highs, which is obviously relieving pressure on yield curves and bond yields, and that is great news for equity valuation and makes currencies move a bit," he said.
A strong earnings season and a relatively robust macroeconomic environment added to a positive market mood, Chaar added.
MSCI's All-Country World Index was little changed, but still around record highs.
OIL BELOW $97 A BARREL
Brent crude fell about 1 per cent to $100.39 a barrel, having tumbled nearly 8 per cent on Wednesday.
Even after that slide, Brent is still around 40 per cent above its late-February level, when the conflict began, while 10-year Treasury yields have surged - a reminder of the strain higher energy costs continue to put on the global economy.
On the day, 10-year Treasury yields were last down by 1.8 basis points to 4.378 per cent.
Nick Twidale, chief market strategist at ATFX Global, said the market was wrestling with execution risk, "both in terms of whether a deal is finalised and how quickly disrupted flows would normalize even if it is."
Rocketing oil prices whacked global markets in March but a fragile ceasefire and prospect of a deal have spurred a risk-on rally since April that has been fuelled by strong tech earnings reports.
S&P COMPANIES SET FOR ROBUST PROFIT GROWTH
S&P 500 companies are on track for their strongest profit growth in more than four years, while blowout results from Samsung, SK Hynix and TSMC have reinforced the upbeat tone in Asia.
"U.S. earnings confirm a broad‑based profit boom - record EPS (earnings per share) beats, all‑time‑high margins and sharply upgraded ’26 growth expectations," Manish Kabra, a market strategist with Societe Generale, wrote in a client note on Thursday.
Investors await the U.S. non-farm payrolls report on Friday, with jobs expected to have increased in April by 62,000 after rebounding 178,000 in March, a Reuters survey of economists shows.
In currency markets, the euro nudged up and last fetched $1.1759. The dollar index, which measures the U.S. currency against six units, was a touch lower at 97.98.
The yen remained in the spotlight after spikes in recent sessions prompted market speculation that Tokyo had intervened to support the long-battered currency.
The yen was little changed at 156.58 per dollar, having hit a 10-week high of 155 on Wednesday.
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