Sentiment waves are on a shore-break – North American Session Market Wrap for May 4

Log in to today's North American session Market wrap for May 4

Market sentiment is turning negative again as the new week begins, and with gas prices rising, this reaction makes sense.

Even though the usual link between markets and the economy has weakened lately, oil prices are once again driving investor decisions.

Higher energy costs are becoming a reality, and with Crude Oil rising back above $105 (WTI) due to renewed geopolitical concerns, Markets are pulling back today.

The strong momentum that pushed indexes to record highs in April is fading as big investors move to safer assets, especially in traditional stocks, while tech stocks are relatively still holding up for now.

This sharp move away from risk comes after reports of Iranian attacks on the UAE, marking a serious and dangerous escalation in the Middle East.

By hitting infrastructure in a nearby economic center, the conflict is spreading just as markets were hoping for a diplomatic solution. This is the largest escalation since the fragile ceasefire began on April 8, nearly a month ago.

With diplomacy breaking down and the risk of a larger regional war growing, traders now have to quickly adjust for higher geopolitical risks:

Metals have pulled back from last week’s highs. Global stock markets, especially those east of the Atlantic, have dropped. Cryptocurrencies are quiet but steady.

Overall, there is a sense of uncertainty, especially ahead of the Non-Farm payrolls report coming on Friday.

Since the energy sector is once again driving the broader market, traders will need to be especially careful with risk management as we move through this volatile phase of the conflict.

Read More:

• ,War fears tarnish Metals – Silver (XAG/USD) breaks $75 & Gold (XAU/USD) tests $4,500
• Stock Markets stumble from renewed Iran tensions – Dow Jones, Nasdaq and S&P 500 Intraday Outlook
• The peace process is stalling ahead of April Non Farm Payrolls – Markets Weekly Outlook

Market correlations are coming back strong as Institutions, traders and investors place their pawns for this new week and month.

Crude Oil dictated most of the flows of the session, with particular suffering among traditional assets and Stock Benchmarks all around the world while higher beta Tech and Cryptos totally survived the crash test.

This seems to be a new trend, as investors keep looking for local advantages to invest – Digital technologies are a natural bet, despite being quite extended, as these get shielded from rising petrol prices.

But they will still be subject ot heavy pressure if the tone decisively sours – I expect to see safe-havens rebounding in such an occurrence.

The US Dollar stepped right back to fade the unfruitful intervention from the Japanese Ministry of Finance which just keeps providing traders the chance to fade the lower move.

Indeed, as long as Crude remains above $100, the Fed maintains higher rates, Japan is still under pressure and nothing really changes.

However, the US Dollar also outperformed the rest of the FX board, so if the war really resumes, this could just be the beginning of another USD buying wave – Make sure to not get too attached to one view because things are changing fast these days!

The next 24 hours will provide important tests for FX Markets.

The first ones coming up in the coming hours, with the Australian PMIs to preview an important RBA rate decision. While rates are planned to stay put, communications regarding future will be closely watched.

The US Session will also offer a few developments with ISM Services PMIs and ADP Private employment

As always, make sure to follow talks around US-Iran negotiations, or to be quite frank, their absolute failure which could materialize in heavy Market turmoil.

Safe Trades!

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