U.S. Opening Bell: Oil Higher; Yields Ease; U.S. Stocks Rally Post Iran Decision

The upbeat Asian session followed the unexpectedly resilient performance posted by US equities in the aftermath of Trump's exit from the Iran deal. Oil's continued rally, past the $71 a barrel level for the first time since 2014, was instead more predictable. WTI prices are extending that rally today, nearing $72 and trading at yesterday's highs.

The UK index spent much of Thursday morning higher. Shares in the Royal Bank of Scotland (LON:RBS) were up on Thursday morning following news that the bank reached a settlement with the US Department of Justice to resolve the issue of mis-sold mortgages ahead of the financial crisis. The RBS and DoJ agreed on a sum of £3.62 billion ($4.9 billion), RBS shareholders will welcome the amount as some analysts had predicted fines could total as much as $12 billion.

BT (LON:BT) shares were down 9.01% on the news the telecoms company is selling its London HQ and cutting 13,000 managerial and back office roles. BT released a disappointing earnings update on Thursday which showed revenues for the fourth quarter of last year were down 3%.

Some good news for the UK retail sector from high street store Next (LON:NXT) as it reported better than expected sales in the first quarter. Shares were up in the retailer by 7.55% on Thursday after it raised profit forecasts for the year.

Yields on 10-year Treasurys retreated, closing half basis point below the crucial 3 percent mark after yesterday reaching an intraday high of 3.014 percent. The benchmark note has continued to ease further on Thursday. US stocks seem to have taken the 3 percent breach in Treasury yields in stride as well.

Elsewhere, former Malaysian Prime Minister Mahathir Mohamad overwhelming won yesterdays election, reclaiming his former position as well as ending the six-decade rule of Prime Minister Najib Razak's party in a landmark shift for the South East Asian nation. Malaysian markets are expected to be closed Thursday and Friday after the government declared public holidays.

The shocking result sent the iShares MSCI Malaysia ETF (NYSE:EWM) to its biggest slump in almost 2 1/2 years. Malaysia's 2045 bonds plunged, to a low last seen in 2016.

Yesterday, Wall Street indices rallied vigorously. The S&P 500 climbed 0.97 percent, with only defensive sector Utilities (-0.7 percent) in the red. Naturally, Energy outperformed (2.04 percent) on the outlook of 1 million barrels a day removed from the oil market after the US reinstated sanctions against Iran.

Financials came in second (+1.48 percent), benefiting from the 10-year Treasury yield crossing the 3.00 percent mark once again intraday. Rising yields drove the dollar index higher for a fourth straight day on the outlook of higher interest rates. Those would increase profits for banks, boosting their share values.

The Dow Jones Industrial Average added 182.33 points or 0.8 percent, with 23 of the 30 biggest US companies ending the day in the green. The NASDAQ Composite gained 73 points or 1 percent.

We forecast that a US withdrawal from the Iran deal would boost oil prices as well as the dollar, while sending equities lower. As such, yesterday's equity bullishness was clearly shocking.

Not only did the risk of an imminent war in the Middle East became more tangible, but US yields returned above 3 percent: remember, rising yields—even long before they reached that key psychological level—are what sent the stock market into its first double-digit correction since February 2016.

While the combination of low unemployment and muted wage growth may be seen as favorable for economic growth in a Goldilocks Economy, record yields pave the way for a spike in interest rates, which no one would see as positive for markets.

Therefore, we consider this short-term bullish movement the prelude to a mid-term, if not longer-term, bearish move. While we reiterate that equity investors have been tuning out geopolitical headwinds since the 2016 Brexit vote, the fact that they're also disregarding the accelerated risk of a spike in rates—after being bearish about that very same event—leads us to see the current trend as driven by greed, and expect the S&P 500 push will be thwarted as it approaches the top of the triangle.

Of course, should the top of the triangle be breached, we would be forced to reconsider our bearishness.

Meanwhile, we would argue that 10-year yields completed a bullish Falling Flag, eyeing the 3.16 percent level.

Earlier today the New Zealand dollar plunged after the central bank left the door open to an interest rate cut as inflation remains contained. Australia’s 10-year bond yield dropped to its lowest level against the greenback since the 1980s.

The British pound moved lower on the news that the Bank of England kept interest rates on hold. Before the decision, released at 11:00 GMT, the pound was up as much as 0.4%. The 2 year gilt yield also fell around 2 basis points.