Risk assets tumbled last night as geopolitical tensions saw more escalations. Talks of attacks on US Navy ships sent geopolitical jitters across markets boosting gold and oil prices.

Today, the financial markets continue to closely monitor the US 10-year Treasury yields as they edge closer to the 5% threshold. This ongoing climb in yields, which reached a new cycle high last night, has added further pressure to risk appetite.

AUDNZD Jumps on Weak NZ CPI Data and Hawkish RBA Minutes

Markets are relatively quiet today as participants digest yesterday’s risk off flows following the slightly better than expected US CPI and a weak 30-year treasury auction. WTI saw a big bounce trading to $85.37 as geopolitical issues remain in focus.

Equity markets continue to bounce following Friday’s NFP report, with ES futures up over 3% from their lows. Bond yields drifted lower yesterday, with US10Y falling back below the 4.70% level.

The recent escalation of tensions between Israel and Hamas has raised concerns about stability in the Middle East. This has put the focus on three key risks: oil, gas, and inflation.

Yields and the USD are both in limbo since yesterday as markets brace for an important NFP.

The other asset to watch is gold as a big miss in the data could give gold a decent nudge higher if both the USD and yields pull back a bit. Just take note momentum on gold is firmly to the downside so adjusting risk accordingly is important.

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Stagflation represents the worst of both worlds for a country’s economy.

As we look to the coming week, China’s challenges persist. The future of the dollar’s rally is uncertain, and upcoming Flash PMI data will offer insights into global economic health.