A look at the day ahead in U.S. and global markets from Mike

Dolan

It was hardly unexpected, but Israel's missile strike on Iran on

Friday confirms fears of a dangerous series of tit-for-tat

retaliation ahead between the Middle East powers that is likely

to seed weeks of uncertainty for world markets too.

Heading into another weekend wondering what may happen in

the region until global exchanges reopen on Monday is set to be

pattern until the standoff is resolved. Concern about targeting

of either country's nuclear operations is top of many minds.

Against that backdrop, the reaction of oil prices, global

stocks and traditional safety trades so far on Friday has been

relatively modest. That's partly as a senior Iran official told

Reuters that Tehran has no plan to strike back immediately while

state media there had an initially subdued response.

U.S. crude initially popped about 4% higher on the

news to $86.3 per barrel - but stayed well shy of the year's

high and reversed virtually all that gain since. To keep it in

context, year-on-year oil price gains are still less than 5%.

It was similar for gold, whose initial surge failed

to hit new records. It also unwound the gains since.

The dollar, which has tended to get both a safety bid

in this geopolitical episode as well as track oil prices as

something of a petrocurrency, also made limited gains. The

traditional safety features of Japan's ailing yen or

Swiss franc were less visible.

World stocks, weighed down more generally by

U.S. interest rate concerns and a patchy corporate earnings

season, fell broadly but major bourses were down less than 1%.

If it ended here, that may all seem well contained.

But with U.S. stock futures in the red again on Friday and

the S&P500 on course to record six straight days of

losses for the first time since 2022, there's clear anxiety

building on Wall Street.

With the S&P500 now off 5% from record highs in less than

three weeks, the VIX VIX> 'fear gauge' of implied volatility

soared above 20 on Friday for the first time since October.

A bigger conundrum for investors is how to play U.S.

Treasuries right now - caught between seeing sovereign bonds as

a haven in times of global conflict and the increasingly hawkish

stance of the Federal Reserve.

Two-year Treasury yields are testing 5% again -

little over quarter of a percentage point below where the Fed

policy rate of 5.25-5.50% currently stands. They fell back only

briefly on the strike on Iran earlier and stand at 4.97% ahead

of today's bell.

To the irritation of some other major central bankers

attending the International Monetary Fund meetings in Washington

this week, Fed officials continue to signal they are in no rush

to cut interest rates this year as they snuff out stubborn

vestiges of the recent inflation spike.

"I definitely don't feel urgency to cut interest rates," New

York Fed boss John Williams said on Thursday.

The ongoing strength of the U.S. labor market and business

activity was visible again on Thursday in sub-forecast weekly

jobless claims and a Philadelphia Fed survey ahead of

expectations.

The European Central Bank, by contrast, seems nailed on to

start cutting its policy rates as soon as June.

In the corporate world, Big Tech is replacing the banks on

the top of the earnings diary but the reaction to the updates is

unsettling there too.

With geopolitical concerns of its own, Taiwan's main bourse

was the big underperformer overnight and dropped almost

4%. TSMC's Taipei-listed shares tumbled almost 7% on Friday

following the company's first-quarter earnings report in which

it dialed back its expectations for chip sector growth and did

not revise up its capital spending plans.

Video giant Netflix's ( NFLX ) shares fell after the bell on

Thursday after it unexpectedly announced it will stop reporting

subscriber numbers each quarter, seen as a sign that years of

customer gains in the streaming wars are coming to an end.

Even though it reported a surprisingly large 9.3 million new

customers for the first quarter, Netflix ( NFLX ) gave a revenue forecast

that missed analyst targets.

Electric vehicle behemoth Tesla continues to alarm

investors, with its shares down 2% again ahead of Friday's bell

and after five straight declines that have seen them lose almost

40% for the year so far to a 15-month low.

There was better news for some of Europe's leading firms,

with shares in L'Oreal jumping 5% after the beauty

company posted a nearly 10% rise in first-quarter sales on a

like-for-like basis.

Key diary items that may provide direction to U.S. markets later

on Friday:

* US corporate earnings: American Express, Procter & Gamble,

Schlumberger, Fifth Third Bancorp, Huntington Bancshares,

Regions Financial

* International Monetary Fund's Spring meeting in Washington

* Chicago Federal Reserve President Austan Goolsbee speaks.

European Central bank policymaker Joachim Nagel speaks. Bank of

England Deputy Governor policymaker David Ramsden and BoE

policymaker Catherine Mann speak. Bank of Canada Governor Tiff

Macklem speaks