Ceasefire expectations drive "buying frenzy": Global stock markets regain lost ground as the US dollar faces possibly the longest continuous decline in 17 years

The expected ceasefire between the US and Iran is driving a resurgence in risk appetite, with markets betting on an extension of the ceasefire agreement or even a peace agreement, gradually reducing the war-driven risk premium. Global financial markets have seen a series of positive reactions due to the easing of geopolitical risks, with global stock markets reaching historic highs, the MSCI global index rising for the 10th consecutive day to a record high, and stock markets in Asia, Europe, and the US all rising. At the same time, oil prices are falling and the US dollar is weakening. Global benchmark Brent crude oil prices are stable around $95 per barrel, well below last month's high of nearly $120. With tensions easing in the Middle East, the US dollar, which was the preferred safe-haven asset during conflicts, is weakening, with the Bloomberg US Dollar Spot Index expected to decline for the ninth consecutive trading day, marking the longest decline since December 2006. In terms of other asset performance, gold and silver have risen, US bond yields have slightly declined, the Australian dollar and Japanese yen have strengthened, and emerging markets and Chinese stock markets have rebounded. Since the outbreak of the war until the low point on March 30th, the MSCI global index had fallen by 9%, but now, with the expectation in the market that the US and Iran will eventually reach a peace agreement, these declines have been completely recovered. In addition, renewed investor enthusiasm for tech stocks has also led to a reversal in the market from last month's sell-off, which temporarily led several stock indices into technical pullbacks. According to sources, the US and Iran are considering extending the ceasefire agreement, which was originally set to expire on Tuesday, by two weeks to allow more time for negotiations to reach a peace agreement. The mediators are trying to arrange technical discussions to address the most controversial issues, including the reopening of the Strait of Hormuz and Iran's nuclear enrichment activities. The easing of geopolitical tensions is driving global financial markets from "risk-off mode" back to "risk-on mode," with investors refocusing on corporate earnings and economic growth, while short-term inflation concerns are easing due to the fall in oil prices. Mark Cranfield, a strategist, commented: "Major Asian stock indices are experiencing another active trading day as the Iran war gradually fades from view, investors will refocus on the profitability of large companies. In addition, the tug-of-war between short-term inflation pressures and medium-term economic growth risks has kept the bond yield curve in a consolidation phase, providing another positive factor for the stock market." Matthew Haupt, portfolio manager at Wilson Asset Management, stated: "The market is returning to pre-war fund flows and positioning structures, as although the conflict is not yet resolved, the market has already seen it as a thing of the past. Going forward, the market needs new information to drive further upside, as the current systematic buying has basically been completed." Based on the situation, the core variables that the market has been focusing on recently have changed, including progress in US-Iran negotiations, whether the ceasefire can be extended, the results of technical negotiations on the sailing of the Strait of Hormuz and the Iran nuclear issue, among others. In terms of oil price trends, as a key input variable for inflation and global growth, whether oil prices will continue to remain below $100 is being closely watched. As for the strength of the US dollar, its role as a safe-haven asset is reversing, and the market is watching for further downside potential. Furthermore, the market is also focusing on the resilience of corporate earnings, especially driven by tech stocks, as the market shifts from macro risks to micro fundamental factors. In terms of inflation and interest rate expectations, the decline in oil prices has eased short-term inflation pressures, stabilizing the bond yield curve and providing support for the stock market. "Risks" or "Opportunities" The current market is in a phase where geopolitical risk premiums are quickly dissipating, with a more optimistic sentiment prevailing. However, the future trend heavily depends on substantive progress in US-Iran negotiations, as well as the dynamic balance between oil prices, inflation, and central bank policies. Investors need to be wary of the risk of a pullback due to the exhaustion of positive news or a reversal in negotiations. Ed Yardeni of Yardeni Research noted that historically, geopolitical crises "often provide excellent buying opportunities. That is exactly the situation we are currently in."