By Lorcan Roche Kelly
Threat and counter-threat
The head of Iran’s national security council said the country is assessing 13 scenarios in response to the killing of a powerful general, adding that even the weakest of them would be a “historic nightmare” for America. The threat follows weekend comments from President Donald Trump in which he warned the U.S. has 52 Iranian sites picked out as targets should Tehran retaliate for the airstrike. While the rhetoric remains aggressive, the lack of any immediate military reaction is starting to ease fears of a rapid deterioration of the situation.
Investors seem keen to put the events in the Middle East aside this morning, with even the statement from Iran only causing a brief dip in equity markets that quickly resumed their recovery from a two-day selloff. The MSCI Asia Pacific Index added 0.9% overnight, while Europe’s Stoxx 600 Index was 0.6% higher by 5:50 a.m. Eastern Time. S&P 500 futures pointed to more gains at the open after yesterday’s strong close. The 10-year Treasury yield was at 1.814% and gold was unchanged after a strong performance in recent sessions.
Crude traders are also taking things more calmly this morning, with the price of a barrel of Brent crude falling below $68.50, down from yesterday’s high over $70. Investors are taking the view that the market will remain well-supplied and skirt a major disruption that Goldman Sachs Group Inc. says is needed to maintain elevated prices. That doesn’t mean that all is calm, with Asian buyers worried that possible U.S. sanctions on Iraq could disrupt shipments from one of their key suppliers.
Hedge fund returns
Hedge funds on average gained 8.6% in 2019, according to an index from HFRX, compared to a 32% rise for the S&P 500. D.E. Shaw & Co.’s flagship fund gained about 10.5% last year, with the company set to increase fees from the start of this year to 3% of assets and 30% of profits — hefty even for one of the pricier funds in the industry. Brevan Howard Asset Management’s main investment vehicle returned 8.4% and saw net inflows in 2019.
The U.S. trade balance for November is published at 8:30 a.m. The final print of November durable goods orders and the December ISM non-manufacturing index is at 10:00 a.m. The consumer electronics show (CES) in Las Vegas continues, with everything from flying taxis and talking toilets to cyborg cars on display. Jeffrey Gundlach’s annual “just markets” webcast is broadcast this afternoon.