Morning Report

Morning Report PDF (PDF 256KB)

Key themes:

• Markets embraced a sense of calm and stability overnight, with the risk of escalation in the Middle East conflict viewed as having diminished after US Defence Secretary Pete Hegseth ensured the ceasefire was still in place, despite the US and Iran trading blows yesterday.
• This put some wind in the sails for risk sentiment, supporting a rebound in equities across the US and Europe at the same time as crude oil prices partially unwound yesterday's climb, with Brent now trading around closer to US$110/bbl.
• Local elections in the UK this week add a layer of uncertainty, the chief risk being a heavier loss of local Labor seats which could spark a leadership challenge to Prime Minister Keir Starmer. Gilt yields have lifted notably in advance.
• The RBA decided in an 8-1 vote to raise the cash rate by 25bps to 4.35%, citing higher inflation stemming from the Middle East conflict, including second-round effects.