- On the first trading day of the new quarter, global stock and bond markets appeared more restrained. Renewed setbacks in U.S.-Iran negotiations have heightened geopolitical risks, while the rise in U.S. Treasury yields has compressed the comfort zone for risk assets.
- Supported by interest rate expectations, the dollar remains strong, while the yen continues to approach multi-decade lows, bringing Japan's potential intervention back into market focus.
- After a strong quarter for U.S. stocks, investors are not rushing to chase gains but are instead waiting for employment data, central bank statements, and the upcoming earnings season to confirm direction.
Geopolitical Negotiations Stalled, Heightening Caution
Iran's refusal to meet with the U.S. envoy suggests that negotiations related to the Strait of Hormuz are unlikely to see a breakthrough in the short term. Even a slight rebound in oil prices will lead the market to reassess transportation and energy risks, thereby dampening risk appetite.
Rising U.S. Treasury Yields Support the Dollar
The real pressure on the bond market comes from rising U.S. interest rate expectations. Traders are increasing their bets on rate hikes ahead of key employment data, keeping the dollar strong and subjecting stocks that rely on a low-interest-rate environment for valuation to stricter scrutiny.
Yen Depreciation Approaches Intervention Sensitivity Zone
The yen's new long-term low not only reflects the U.S.-Japan interest rate differential but also tests Japanese authorities' tolerance for exchange rate fluctuations. If the market perceives potential official intervention, volatility in forex and stock indices could be simultaneously amplified.
Earnings Season to Determine Continuation of Risk Appetite
After a significant rise last quarter, Wall Street needs new earnings evidence to support the high valuations of tech stocks. If banks and major tech companies continue to exceed expectations, risk appetite may warm up again; otherwise, the current cautious tone could spread more broadly.
