Yesterday US markets started off celebrating the Knicks comeback, pulled back from the highs as President Trump suggested there could be an escalation in the Iran conflict including taking Kharg Island but then ripped into the close as he did an about face saying strikes had been called off as “final points have been approved in principle and in detail by all parties involved” which included multiple Middle Eastern countries (though Iran wasn’t specifically mentioned). It was clear markets were never putting much stock in the Kharg Island threats as oil prices only moved modestly higher, but they fell sharply on the agreement headlines with ICE Brent testing the recent lows ~$90. This caused a reversal in Treasury yields which fell nearly 10bps across the curve with both the 10/30yr yields breaking back below 4.5%/5%, respectively. Before the headlines the USD index was threatening the March highs ~$100.50 but also reversed breaking back below $100. The dollar reversal and markets starting to reprice some of the Fed hawkishness also caused a sharp reversal in precious metals which have been getting throttled recently. The S&P 500 ended up nearly 2% reversing this week’s decline, with tech the biggest beneficiary of the reversal (NYSE 100 +3%/Semis +>8%). However, small/midcap indices outperformed on the day closing up between 2% - 3%.

Overnight, press reports suggested that a deal could be signed at the G7 next week which would include a 60-day extension of the ceasefire, a reopening of the Strait and further negotiations on the nuclear program, though this has not been approved by Iran, and Israel has said it was not part of the agreement. Futures were extending gains this morning but have pulled from the highs as Iranian press said the claims of signing an agreement on Sunday is “pure falsehood”.