Rate Cut Expectations Cool Down, Gold Price Drops Below 5100 Ahead of Non-Farm Payroll Data; ‘Supply Cutoff’ Fears Ignite Oil Prices
In the early Asian trading session on Friday (Beijing time, March 6), spot gold was trading near $5,086 per ounce. Gold prices fell on Thursday primarily due to pressure from rising U.S. Treasury yields and a stronger dollar, which significantly weakened expectations for Federal Reserve rate cuts. Market participants are awaiting the release of non-farm payroll data. Meanwhile, U.S. crude oil traded near $79.25 per barrel, with oil prices surging nearly 4% on Thursday as ongoing escalation in the conflict between the U.S., Israel, and Iran disrupted oil supply and transportation in the Middle East, forcing some major oil-producing countries to cut production.
Key Points for the Day
equity markets
U.S. stocks closed lower on Thursday, with the Dow Jones Industrial Average falling 1.61% to 47,954.74 points, the S&P 500 Index declining 0.56% to 6,830.71 points, and the Nasdaq Composite Index dropping 0.26% to 22,748.99 points.
As the conflict in the Middle East entered its sixth day, oil prices continued to climb to multi-month highs, intensifying market concerns about inflationary pressures and economic growth prospects. Expectations for Federal Reserve rate cuts have also come under heightened scrutiny. Michael Antonelli, market strategist at Baird Private Wealth Management, stated that oil price movements were key to understanding the stock market decline. Markets are assessing the duration of the conflict and its potential economic impact amid fears that the spread of hostilities to more countries could disrupt crude oil supplies through the Strait of Hormuz.
Sector-wise, the industrials, materials, and healthcare sectors of the S&P 500 all fell by over 2%. The passenger airline sector plummeted 5.4%, with Southwest Airlines dropping 6.9%. However, energy stocks bucked the trend and strengthened due to anticipated revenue boosts from rising oil prices. The S&P energy sector rose 0.6%, Chevron shares surged 3.9%, and tech stocks edged up 0.4%, with Broadcom climbing 4.8% on optimistic forecasts for AI chip revenues.
On the economic data front, last week’s U.S. initial jobless claims remained flat. However, Steve Ricchiuto, chief economist at Mizuho Securities, noted that stronger-than-expected ISM manufacturing and services data raised expectations for the upcoming non-farm payroll report. Signs of economic improvement may reduce the likelihood of Federal Reserve rate cuts. Currently, markets expect around 40 basis points of rate cuts this year, down from 50 basis points prior to the outbreak of the conflict. Additionally, declines in financial stocks like JPMorgan and Goldman Sachs weighed on the Dow. Despite Wall Street outperforming European and Asian markets this week due to a rebound in tech stocks, the Nasdaq has risen 0.36% since the start of the conflict. Investors remain vigilant for any reports signaling an end to the conflict, particularly as oil prices nearing $100 per barrel could spark broader concerns.
Gold Market
Gold prices reversed earlier gains and turned negative on Thursday, erasing intraday advances, mainly pressured by rising U.S. Treasury yields and a stronger dollar. Although safe-haven demand driven by escalating tensions in the Middle East initially supported gold prices.
As the situation in the Middle East entered its sixth day, military actions by U.S.-led coalition forces against Iran intensified, raising concerns that the conflict could push up oil prices and inflation, thereby weakening expectations for Federal Reserve rate cuts. Bart Melek, global head of commodity strategy at TD Securities, said that inflation risks from rising oil prices and climbing U.S. Treasury yields typically weigh on gold prices.
Spot gold fell 1.2% to $5,076.59 per ounce after hitting an intraday high of $5,194.59. The U.S. dollar index rose 0.5%, making dollar-denominated gold more expensive for overseas buyers. The yield on the 10-year U.S. Treasury note climbed to a three-week high, increasing the opportunity cost of holding gold.
However, Melek noted that signs of a significant rise in U.S. fiscal deficits and macroeconomic uncertainties continue to support the fundamental outlook for gold.
Regarding economic data, last week’s U.S. initial jobless claims remained unchanged, while February layoffs dropped sharply. The Federal Reserve’s latest report showed a slight increase in recent economic activity, with prices continuing to rise and employment levels remaining stable. Markets widely expect the Fed to keep interest rates unchanged at its policy meeting on March 18. Investors are closely watching the U.S. February jobs report due on Friday for further clues on the future trajectory of interest rates.
In other precious metals, spot silver fell 1.8% to $81.91, platinum dropped 1.1% to $2,125.10, and palladium declined 2.4% to $1,634.15.
Oil Market
Oil prices closed higher on Thursday, mainly due to the escalating conflict between the U.S., Israel, and Iran, which disrupted oil supplies and transportation in the Middle East, forcing some major oil-producing countries to cut production.
Brent crude futures closed up about 5% on Thursday, marking the fifth consecutive session of gains. West Texas Intermediate (WTI) crude rose nearly 4%, hitting a new high of $82.16 per barrel since July 2024 during the session. John Kilduff, partner at Again Capital, pointed out that tensions in the Strait of Hormuz and prolonged delays in restoring production after cuts by multiple countries were key factors driving the continued rise in oil prices.
On the geopolitical front, U.S. President Trump expressed a desire to be involved in determining Iran’s next leader, while the Israeli military warned residents to evacuate areas including Tehran. Iranian media reported explosions heard in multiple parts of the capital. Additionally, attacks on oil tankers in the Gulf region continued, with a Bahamian-flagged tanker attacked near Iraq’s Zubair Port, causing hull damage.
The supply side has been severely impacted. As the second-largest oil producer in OPEC, Iraq has reduced production by nearly 1.5 million barrels per day due to a lack of storage space and export routes. JPMorgan analysts warned that if the Strait of Hormuz remains blocked, crude oil supplies from Iraq and Kuwait could be interrupted within days, potentially reducing output by 3.3 million barrels per day by the eighth day of the conflict.
Giovanni Staunovo, an analyst at UBS Group, stated that attacks on oil tankers and China’s measures to reduce refined oil exports further pushed up prices, while reduced exports from the Middle East also led to tightening signs in the refined oil market.
Foreign exchange market
The dollar regained momentum on Thursday, with the U.S. Dollar Index rising 0.5% to 99.26 points, rebounding after a brief retreat from a three-month high, as the escalating conflict in the Middle East heightened market unease and fueled demand for the dollar as a safe haven.
As the conflict entered its sixth day, Iran vowed to retaliate against the U.S. for sinking one of its warships, replacing earlier hopes for de-escalation with a new wave of uncertainty. This kept the dollar strong, with the euro falling 0.4% to $1.1580 and the pound dropping 0.3% to $1.3326.
Elisabeth Colleran, Co-Head of the Emerging Markets Debt Team at Loomis Sayles, noted that although “de-dollarization” was previously a hot topic, this week’s market turmoil proved that when risks escalate, the dollar inevitably strengthens. Driven by renewed risk aversion and inflation concerns, some traditional safe-haven assets performed unusually, with investors selling German and U.S. bonds, pushing their yields up to 2.829% and 4.138%, respectively.
Foreign exchange market investors reacted indifferently to the unchanged U.S. initial jobless claims data of 213,000 released on Thursday, as the market focused on Friday’s non-farm payroll report. The survey forecasted 59,000 new jobs added in February, lower than the previous figure.
Jayati Bharadwaj, Head of FX Strategy at TD Securities, believes that although there is room for short-term adjustments for dollar bulls, the upward trend of the dollar may continue as long as crude oil risk premiums remain high, with its trajectory potentially resembling that of June 2025. The dollar has risen nearly 1.5% so far this week, on track for its best weekly gain since November 2024.
The surge in oil prices has heightened market concerns about a resurgence of inflation, which could disrupt the interest rate outlook for major central banks. Current U.S. interest rate futures show that expectations for rate cuts this year have been reduced from 59 basis points before the conflict to only 40 basis points. Expectations for rate cuts by the Bank of England have also been scaled back, while money markets are betting that the European Central Bank might raise rates as early as this year. The dollar rose 0.5% against the yen to 157.78 yen.
International News
The United States and Mexico Initiate Joint Review Process of the USMCA
On March 5 local time, the United States and Mexico initiated the joint review process of the USMCA. The Office of the U.S. Trade Representative stated that, as part of the joint review, negotiators from the U.S. and Mexico will begin bilateral talks during the week of March 16. According to a statement released by the Office of the U.S. Trade Representative, U.S. Trade Representative Jamieson Greer and Mexican Secretary of Economy Marcelo Ebrard have instructed negotiators to initiate preliminary discussions on measures needed to ensure the agreement benefits all parties. These measures include reducing reliance on imports from outside the region, strengthening rules of origin, and enhancing the security of North American supply chains. The statement also noted that, as part of the joint review, negotiators are expected to meet regularly.
The fourth meeting of Iran’s Interim Leadership Council was held.
On March 5 local time, the fourth meeting of Iran’s Interim Leadership Council, chaired by Iranian President Masoud Pezeshkian, convened. Larijani, Secretary of Iran’s Supreme National Security Council, reported on the latest developments in the conflict. While firmly supporting the armed forces’ participation in this battle, the council members decided to strengthen the military capabilities. The members also expressed that Iran would make the US and Israel yield through steadfast resistance, in response to inappropriate remarks made by US President Trump regarding Iran’s Supreme Leader election. (CCTV International News)
Kuwait Reduces Refinery Operating Rates Amid Blockade of the Strait of Hormuz
Sources familiar with the matter said that Kuwait has cut operating rates at three refineries, and if necessary, the production reduction measures may be extended further in the coming days. According to sources, the production cuts are due to limited storage capacity. The Iran conflict has plunged the Middle East oil industry into chaos as the blockade effectively closed the Strait of Hormuz. With insufficient tankers affecting exports, storage facilities are rapidly filling up. Additionally, refineries in Saudi Arabia and Bahrain have been damaged and forced to reduce processing volumes. Kuwait, an OPEC member, has a total refining capacity of approximately 1.4 million barrels per day across its three refineries: Al-Zour, Mina Al-Ahmadi, and Mina Abdullah. Among them, Al-Zour is one of the largest refining facilities in the Middle East.
Israeli Military Says Strikes on Iran Entering Next Phase
On the evening of March 5 local time, Chief of Staff of the Israel Defense Forces (IDF), Zamil, stated at a press conference that following the completion of the surprise phase of strikes on Iran, achieving air superiority, and suppressing Iran’s ballistic missile sites, the IDF is now entering the next phase of operations. The IDF will intensify efforts to undermine the foundations of the Iranian regime and its military capabilities.
Over 20 U.S. States File Lawsuit Against Federal Government’s New Global Tariff Policy
On March 5 local time, it was reported that over 20 U.S. states have filed a lawsuit to block the federal government’s latest global tariff policy. Democratic attorneys general leading the lawsuit argue that President Trump’s plan to impose a 15% tariff on most of the world exceeds his authority. On February 20, the U.S. Supreme Court ruled that large-scale tariff measures implemented by the Trump administration under the International Emergency Economic Powers Act lacked clear legal authorization. Following the ruling, Trump invoked Section 122 of the Trade Act of 1974 on the same day, announcing a “global import tariff” of 10% for 150 days to replace the tariffs deemed illegal by the Supreme Court. The following day, Trump posted on his social platform Truth Social, stating he would raise the 10% import tariff on global goods to 15%. The lawsuit was led by the attorneys general of Oregon, Arizona, California, and New York. The states claim that the scope of Section 122 is limited to specific and finite circumstances and does not grant the president the power to impose comprehensive import taxes; additionally, these tariffs will increase costs for states, businesses, and consumers.
Trump Requests Immediate Pardon for Israeli Prime Minister
According to a report by Axios, U.S. President Trump, in a telephone interview on March 5 local time, stated that Israeli President Herzog must ‘today’ pardon Israeli Prime Minister Netanyahu. He described Herzog’s failure to act on the pardon over the past year as ‘a disgrace.’ Trump said, ‘I talk to Bibi (Netanyahu) about the war every day. I want him to focus on the war, not legal cases. The only pressure I want on Bibi (Netanyahu) is the war against Iran.’ It was reported that Trump has suspended all diplomatic meetings with Herzog until Netanyahu is formally pardoned. (CCTV International News)
Trump Requests Kurdish Assistance for U.S. Actions Against Iran
According to a report by The Washington Post on the 5th, U.S. President Trump requested Kurdish assistance for U.S. operations in Iran and stated that support including air cover would be provided. Citing multiple sources, the report said that during a call this week with Kurdish leaders from Iran and Iraq, Trump promised ‘extensive U.S. air cover’ and other support to help ‘Iranian Kurdish opposition forces occupy parts of western Iran.’ A senior official from the Patriotic Union of Kurdistan in Iraq said that during a phone call with the organization’s leader on the 1st, Trump asked Iraqi Kurds to ‘open roads’ for Iranian Kurdish armed groups in Iraq. According to Axios, officials from the U.S. and Israel revealed that militants from various Iranian Kurdish factions are preparing for a potential ground offensive in northwestern Iran. These fighters have been supported by intelligence agencies from Israel and the U.S. The report also mentioned that on the 1st, Trump spoke with leaders of the Kurdistan Regional Government, Barzani and Talabani, about the conflict and its future direction; however, both Barzani and Talabani expressed reservations about ‘participating in any ground actions against Iran.’ White House Press Secretary Leavitt confirmed on the 4th that Trump had spoken with Kurdish leaders, stating that the discussion was ‘related to our bases in northern Iraq,’ and denied reports that Trump had agreed to arm the Kurds for an offensive against Iran. (Xinhua News Agency)
Report: U.S. Department of Defense Seeks Information on Potential Reserves of Five Key Minerals
The U.S. Department of Defense is seeking information on potential reserves of five key minerals. The Defense Logistics Agency announced on its official website on Wednesday that it is soliciting information on lithium, nickel, tin, chromium, and tellurium to understand interested suppliers, product specifications, material sources, and market conditions. The Defense Logistics Agency stated that this inquiry aims to prepare for potential procurement, involving 550 tons of lithium carbonate, 3,500 tons of nickel, 1,978 tons of London Metal Exchange (LME) grade tin, 37 tons of tellurium, and 4,500 short tons of chromium. Additionally, the Defense Logistics Agency is seeking information regarding the reprocessing or remelting of 1,978 tons of tin ingots affected by ‘tin pest.’
Domestic News Highlights
Global Smart Robot Hardware Market Size to Approach $30 Billion by 2026
According to IDC’s latest forecast, the global intelligent robotics hardware market is expected to reach nearly $30 billion by 2026. China will lead the growth of the global embodied intelligence robotics market, becoming the core driving force behind the accelerated expansion of the market. By then, the scale of China’s embodied intelligence robotics market will exceed $11 billion.
Government Work Report: Economic Growth Target for 2026 Set at 4.5%-5%
The Government Work Report outlined that the primary expected targets for development in 2026 are: economic growth of 4.5%-5%, striving for better results in actual work; urban surveyed unemployment rate around 5.5%; more than 12 million new urban jobs; consumer price index increase of about 2%; resident income growth in line with economic growth; basic balance in international payments; grain output of approximately 1.4 trillion catties; and a reduction of carbon dioxide emissions per unit of GDP by about 3.8%. (CCTV)
