Optimism on global markets shifted the mood
U.S. President Trump's rejection of Iran's proposal and the rise in oil prices left the positive mood in the markets behind.
With U.S. President Trump rejecting Iran's proposal regarding the Strait of Hormuz and Brent crude oil rising, the prevailing optimism in global markets gave way to a cautious course.
Fed Policies and Rate Expectations
While money markets price in three rate hikes from the Fed over the next year, some investors think the tightening might not be that strong.
Ulrike Hoffmann-Burchardi from UBS Chief Investment Office anticipates that Fed officials are speaking in a hawkish tone, but policies will be less aggressive.
U.S. Economic Data and Consumer Confidence
Consumer confidence in the U.S. fell to its lowest level in the last four months amid concerns over rising prices.
In the same period, companies' orders for equipment investments recorded an increase above market expectations.
Strait of Hormuz and Oil Prices
U.S. President Trump's rejection of Iran's latest proposal to reopen the Strait of Hormuz reversed the optimism in the markets.
As expectations for a diplomatic solution weakened, Brent crude oil rose by 2.5 percent to reach around 107 dollars.
Bond Yields and Inflation Concerns
Concerns that high energy prices will increase inflation and drive the Fed to further rate hikes accelerated bond sales.
The U.S. two-year Treasury yield increased by 5 basis points to 4.90 percent, while 10-year yields also moved upward.
Commodity Markets and Foreign Exchange Movements
High interest rate expectations pulled gold prices down by 2 percent and silver prices down by 3.6 percent.
The Bloomberg Dollar Index, which gained 1 percent over the entire past week, started the new day with a 0.14 percent increase.