Investor Sentiment Improves As Trump Iran Talks Trigger Market Gains And Lower Borrowing Costs

Source: Reuters.

The reaction from markets was swift and marked: Brent crude oil futures fell sharply, the dollar fell against other major currencies, stock markets rallied and government borrowing costs fell back.

"Trump has instructed a five-day pause...that basically triggered what I would call some sort of “Taco” movement in markets where we have seen all prices move lower and rates rallying," said Evelyne Gomez-Liechti, multi-asset strategist for global markets at Mizuho.

Trump said the postponement followed productive conversations with Iran. Headlines from Iranian media that contradicting Trump's comments, tempered market moves, Gomez-Liechti noted.

Still, the overall positive sentiment appeared to prevail for now.

US stock futures were 1.9% higher, pointing to a strong open on Wall Street, while European stocks were last up 0.6% having risen by as much as 2%.

In government bond markets, yields which had risen sharply higher ahead of the Trump comments, were down sharply.

Britain's battered two-year bond yield got a respite, last down about 11 basis points on the day.

US Treasury yields were 2-5 bps lower across, with 10-year yields last down 4 bps at 4.35%.

The dollar was broadly soft, having traded higher against most other currencies until the headline hit.

The euro was last flat at $1.156, up from an earlier low of $1.487.

"It’s clearly jaw boning in the face of the meltdown that we've seen. We're seeing a bit of a knee-jerk reaction to this positive news," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman.

"If it's a legitimate de-escalation, we could see a bit more of a relief rally in risk assets."

Brent crude oil was last down over 7% at $103.5 a barrel.