Israel-Hezbollah Ceasefire Rattles Markets in Thin Holiday Trade
A fragile Middle East ceasefire and weak Canadian retail data shaped a muted Friday session with US markets closed for the holiday.
A ceasefire agreement between Israel and Hezbollah landed just as US markets were shuttered for a public holiday, leaving global price discovery in the hands of thinner-than-usual trading conditions. The initial reaction was textbook risk-off relief — oil dropped more than a dollar — but the move reversed almost entirely as reports of continued shelling in Southern Lebanon emerged within hours of the announced truce. The fragility of the deal was underscored by statements from Iran expressing displeasure and a pointed remark from President Trump urging Israel to give the ceasefire a genuine chance.
Crude oil ultimately closed higher on the day, gaining roughly 94 cents to settle near $77.54 a barrel for WTI — a telling sign that traders were skeptical the ceasefire would hold. Gold, which had mounted a brief $30 intraday rally, surrendered most of those gains and ended the session down nearly $49 at $4,160. The precious metal's inability to capitalize on geopolitical uncertainty raises questions about near-term bullish momentum heading into the following week.
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On the macro data front, Canada's April retail sales headline figure came in at plus 0.5 percent, marginally below the 0.6 percent consensus, but the underlying picture was considerably weaker. Core retail sales fell 0.7 percent month-over-month, with the entire headline gain attributable to higher gasoline prices rather than genuine consumer spending strength. The Canadian dollar bore the brunt of that disappointment, with USD/CAD climbing to its highest level since November as the loonie lagged all major peers.
Perhaps the most underappreciated story from the session was a disconnect in bond markets, where pricing shifted toward a more hawkish Federal Reserve outlook while equity futures and risk assets largely shrugged off the move. Whether that divergence closes through a bond market correction or an equity repricing remains one of the central questions for the week ahead. Meanwhile, political uncertainty in the United Kingdom added another layer of complexity, with reports suggesting Prime Minister Starmer faces cabinet pressure to announce a departure timeline.
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