Stock Market Update

Equity futures point to a lower opening this morning following attacks by the U.S. and Israel on Iran over the weekend, with Iran launching its own strikes against several countries in the region as a response. The conflict has now entered its third day, sending oil prices sharply higher. Crude oil is currently up $5.42 (+8.1%) to $72.44 per barrel, with The New York Times reporting that tanker traffic is down around 70% in the Strait of Hormuz.

The market was relatively resilient to geopolitical developments in Iran last June when the U.S. bombed its top nuclear facility, but the sharp increase in oil prices and fears of a prolonged conflict could weigh on sentiment this time around. President Trump told reporters that the war with Iran could last 4 to 5 weeks, according to The New York Times.

Stocks were already displaying a "risk-off" positioning before this weekend's conflict, with mega-cap, tech, and small-cap stocks lagging on Friday while energy and defensive sectors outperformed. Action has been choppy in recent sessions as concerns of AI disruption continue to spread into new pockets of the market.

The S&P 500 and DJIA will both enter the first session of March 0.3% below their respective 50-day moving averages, while the tech-heavy Nasdaq Composite lags further behind.

In corporate news:

• The U.S. is not planning on releasing oil from the strategic reserve, according to Financial Times.
• Airlines have cancelled numerous flights due to the conflict in Iran, according to Reuters.
• NVIDIA (NVDA 174.56, -2.63, -1.5%) is planning to introduce a new chip to speed up AI processing, according to The Wall Street Journal.

Reviewing overnight developments:

Equity indices in the Asia-Pacific region had a mostly lower start to the week amid focus on a weekend joint Israel-U.S. operation against Iran, which resulted in killing of Supreme Leader Khamenei. Japan's Nikkei: -1.4%, Hong Kong's Hang Seng: -2.1%, China's Shanghai Composite: +0.5%, India's Sensex: -1.3%, South Korea's Kospi: CLOSED, Australia's ASX All Ordinaries: -0.1%.

In news:

• Bank of Japan Deputy Governor Himino said that rate hikes will continue, but he did not specify the planned timing of the next increase.
• Japan's Manufacturing PMI (53.0) expanded for the second consecutive month in February.

In economic data:

• China's January FDI -5.7% YTD (last -9.5%)
• Japan's February Manufacturing PMI 53.0 (expected 52.8; last 51.5)
• South Korea's February trade surplus $15.51 bln (expected surplus of $10.00 bln; last surplus of $8.72 bln). February Imports 7.5% yr/yr (expected 13.0%; last 11.6%) and Exports 29.0% yr/yr (expected 24.0%; last 33.8%)
• Australia's February Manufacturing PMI 51.0 (expected 51.5; last 52.3). February MI Inflation Gauge -0.2% m/m (last 0.2%), and February Commodity Prices 2.7% yr/yr (last 2.7%). Q4 Company Gross Operating Profits 5.8% qtr/qtr (expected 1.8%; last 1.5%) and Q4 Company Pre-tax profits 1.6% qtr/qtr (last 0.4%)
• India's February Manufacturing PMI 56.9 (expected 57.5; last 55.4). January Industrial Production 4.8% yr/yr (expected 6.5%; last 7.8%) and January Manufacturing Output 4.8% (last 8.1%)

Major European indices trade in the red amid some pressure on sentiment stemming from the weekend joint Israel-U.S. military action against Iran. STOXX Europe 600: -1.8%, Germany's DAX: -2.4%. U.K.'s FTSE 100: -1.2%, France's CAC 40: -2.0%, Italy's FTSE MIB: -1.9% Spain's IBEX 35: -2.6%.

In news:

• Travel-related names are among the worst performers while shipping, energy, and military contractor names have shown relative strength.
• Germany reported weak Retail Sales for January (-0.9%; expected 0.0%) while final February Manufacturing PMI readings from the region pointed to slight growth.

In economic data:

• Eurozone's February Manufacturing PMI 50.8, as expected (last 49.5)
• Germany's January Retail Sales -0.9% m/m (expected 0.0%; last 1.2%); 1.2% yr/yr (last 4.3%). February Manufacturing PMI 50.9 (expected 50.7; last 49.1)
• U.K.'s February Nationwide HPI 0.3% m/m (expected 0.2%; last 0.3%); 1.0% yr/yr (expected 0.7%; last 1.0%). February Manufacturing PMI 51.7 (expected 52.0; last 52.0). January Mortgage Approvals 60,000 (expected 62,000; last 61,010) and January Net Lending to Individuals GBP5.90 bln (expected GBP6.20 bln; last GBP6.10 bln)
• France's February Manufacturing PMI 50.1 (expected 49.9; last 51.2)
• Italy's February Manufacturing PMI 50.6 (expected 49.1; last 48.1)
• Spain's February Manufacturing PMI 50.0 (expected 49.9; last 49.2)
• Swiss January Retail Sales -1.1% yr/yr (expected 2.7%; last 2.8%) and February Manufacturing PMI 47.4 (expected 49.8; last 48.8)