US equity futures crept higher and Treasuries dropped as caution prevailed among investors tracking diplomatic efforts to contain the Israel-Hamas conflict.
(Bloomberg) — US equity futures crept higher and Treasuries dropped as caution prevailed among investors tracking diplomatic efforts to contain the Israel-Hamas conflict.
Markets were broadly calmer Monday after last week’s rush into haven assets, as investors await further developments in the Middle East. The war is an additional concern for traders already busy interpreting the outlook for the economy and interest rates, just as the latest earnings reporting season gets into full swing.
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S&P 500 contracts rose 0.3% and those for the Nasdaq 100 steadied after declines on Wall Street at the end of last week. Pfizer Inc. fell in premarket after the pharmaceutical giant slashed its revenue and earnings forecasts. Apple Inc. dropped after a study pointed to disappointing sales of the new iPhone. European energy stocks were boosted by recent gains in oil prices, with Shell Plc hitting a record high.
The biggest swings were in Treasuries, where 10-year yields jumped and clawed back some of last week’s 19 basis-point drop, while those on the 30-year climbed 10 basis points. Brent crude oil held near $91 a barrel, after surging almost 6% on Friday. Gold fell.
“The geopolitical tension in the Middle East remains the key focus of the market,” said Luke Hickmore, investment director at Abrdn Investment Management. “It might seem calmer now, but if the war widens to include other parts of the area then that means more pressure on oil and more uncertainty for the market to cope with. It’s going to be a big driver here.”
US officials rushed to speak with Middle Eastern nations — including back-channel talks with Iran — to contain the conflict. President Joe Biden is weighing visiting Israel himself and German Chancellor Olaf Scholz is expected to arrive Tuesday, according to Bild Zeitung. Jordan’s King Abdullah II is in Rome, where he’s expected to meet Prime Minister Giorgia Meloni as part of an effort to ease tensions.
Elsewhere on the political front, Polish equities jumped the most since February 2022 and the zloty rallied as a bloc of pro-European opposition parties appeared on track to unseat the nationalist government.
In other individual stock moves Monday, Manchester United Plc slumped after Bloomberg News reported that a Qatari group of investors had withdrawn its bid to buy the English football club. Lululemon Athletica Inc. was poised for a seventh day of gains, with the the athletic apparel maker on track for inclusion in the S&P 500.
Semiconductor stocks in Europe and the US underperformed after Bloomberg News reported that Washington plans to close the loopholes in rules restricting China’s access to advanced semiconductors and chipmaking gear. Nvidia Corp dropped 1.5% in premarket trading.
As the earnings season ramps up, Wall Street strategists warned that the outlook for corporate profits is weakening and could remain subdued. Morgan Stanley’s Michael Wilson said earnings revisions breadth — referring to the number of stocks seeing upgrades versus downgrades — for the S&P 500 has fallen sharply over the past couple of weeks.
Citigroup Inc.’s index of earnings revisions shows downgrades have outpaced upgrades for four straight weeks ahead of the reporting season. JPMorgan strategist Mislav Matejka expects this to continue.
In Asia Monday, a gauge of the region’s shares slipped as stocks dropped in mainland China despite the central bank making the biggest medium-term liquidity injection since 2020. The People’s Bank of China injected a net 289 billion yuan ($39.6 billion) through a medium-term lending facility on Monday and kept the policy rate unchanged at 2.5%.
Elsewhere in currencies, Israel’s shekel fell to its weakest level since 2015, while a gauge of dollar strength edged lower.
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Traders are also keeping a close eye on the latest economic data and awaiting a busy line up of Federal Reserve speakers for clues on the policy outlook. Key updates on the state of the global economy due this week include Chinese growth figures and inflation readings in Japan, the UK and the euro zone. Meanwhile, Fed chairman Jerome Powell is among those set to speak following a string of stronger-than-expected data readings.
“There is still lots of macro uncertainty,” said Nikolaos Panigirtzoglu, global strategist at JPMorgan Chase & Co. “Markets priced in lots of recession risk in 2022 and priced it out in 2023 as recession has not been happening this year and are now in waiting mode trying to gauge whether a recession could be happening in 2024.”
Key events this week:
- Russian Foreign Minister Sergei Lavrov visits China, Monday
- US Treasury Secretary Janet Yellen meets with euro-area finance ministers in Luxembourg, Monday
- European Central Bank governing council member François Villeroy de Galhau speaks, Monday
- Bank of England chief economist Huw Pill speaks, Monday
- US Empire Manufacturing index, Monday
- Philadelphia Fed President Patrick Harker speaks, Monday
- Chinese President Xi Jinping hosts world leaders at the Belt and Road Initiative forum in Beijing, with Russian President Vladimir Putin expected to attend, Tuesday
- Germany ZEW survey expectations, Tuesday
- UK jobless claims, unemployment, Tuesday
- Joint European Central Bank/IMF policy and research conference, Tuesday
- US retail sales, business inventories, industrial production, cross-border investment, Tuesday
- Goldman Sachs, Bank of America earnings, Tuesday
- New York Fed President John Williams moderates discussion, while Richmond Fed President Tom Barkin speaks at a separate event, Tuesday
- Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday
- China GDP, retail sales, industrial production, Wednesday
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- Morgan Stanley, Netflix, Tesla earnings, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
- Australia unemployment, Thursday
- Japan trade, Thursday
- China property prices, Thursday
- US initial jobless claims, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- President Joe Biden hosts the European Union’s Ursula von der Leyen in Washington, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.3% as of 8:27 a.m. New York time
- Nasdaq 100 futures rose 0.1%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.2% to $1.0533
- The British pound rose 0.2% to $1.2172
- The Japanese yen was little changed at 149.43 per dollar
Cryptocurrencies
- Bitcoin rose 2.2% to $27,808.84
- Ether rose 1.3% to $1,584.15
Bonds
- The yield on 10-year Treasuries advanced six basis points to 4.67%
- Germany’s 10-year yield advanced three basis points to 2.77%
- Britain’s 10-year yield advanced seven basis points to 4.45%
Commodities
- West Texas Intermediate crude rose 0.5% to $88.16 a barrel
- Gold futures fell 0.6% to $1,930.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Pearl Liu.
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