European stocks and US equity futures fluctuated while Treasuries dropped as cautious traders tracked efforts by the US and its allies to prevent further escalation of the Israel-Hamas conflict.
(Bloomberg) — European stocks and US equity futures fluctuated while Treasuries dropped as cautious traders tracked efforts by the US and its allies to prevent further escalation of the Israel-Hamas conflict.
Technology shares were among the decliners in Europe after Bloomberg News reported that the US is considering further restrictions to curb China’s access to advanced semiconductors. Energy stocks were boosted by recent gains in oil prices, with Shell Plc hitting a record high. Polish equities jumped the most since May 2022 and the zloty rallied as a bloc of pro-European opposition parties appeared on track to unseat the nationalist government.
Markets were slightly steadier Monday after last week’s rush into haven assets, as investors await further developments in the Middle East. The conflict 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.
S&P 500 contracts and those for the Nasdaq 100 were little changed after declines on Wall Street at the end of last week. Treasury 10-year yields rose, clawing back some of last week’s 19 basis-point drop. Brent crude oil slipped, still trading above $90 a barrel, after surging almost 6% on Friday. Gold fell by 1%.
“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. A sharper escalation could bring Israel into a direct clash with Iran, a supplier of arms and money to Hamas, which the US and the EU have designated a terrorist group.
In other individual stock moves, Pfizer Inc. fell in US premarket trading after the pharmaceutical giant slashed its revenue and earnings forecasts. Manchester United Plc slumped 18% after Bloomberg News reported that a Qatari group of investors had withdrawn its bid to buy the English football club.
In Asia, 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.
Headwinds in China’s markets are growing. The US has moved to tighten curbs on advanced chip technology and concerns continue about the mainland property sector. The People’s Bank of China injected a net 289 billion yuan ($39.6 billion) via a medium-term lending facility on Monday and kept the policy rate unchanged at 2.5%.
The US said it will tighten sweeping measures that restrict China’s access to advanced semi-conductors and chip-making gear in a bid to prevent its geopolitical rival from getting a military edge.
Elsewhere in currencies, a gauge of dollar strength edged lower, while New Zealand’s dollar led gains among major peers after the country elected a center-right government on Saturday.
Click here for the latest news in the Israel-Hamas conflict
Traders are also keeping a close eye on the latest economic data and parsing comments from central bank officials for clues on the policy outlook. Federal Reserve Bank of Philadelphia President Patrick Harker said disinflation is under way and reiterated that he favors holding interest rates where they are, barring a sharp change in data, despite a lift in US consumers’ year-ahead inflation expectations in early October.
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 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
- The Stoxx Europe 600 was little changed as of 9:54 a.m. London time
- S&P 500 futures rose 0.2%
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average rose 0.3%
- The MSCI Asia Pacific Index fell 0.9%
- The MSCI Emerging Markets Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.0540
- The Japanese yen was little changed at 149.50 per dollar
- The offshore yuan was little changed at 7.3164 per dollar
- The British pound rose 0.1% to $1.2158
Cryptocurrencies
- Bitcoin rose 2.3% to $27,841.38
- Ether rose 1.1% to $1,582.35
Bonds
- The yield on 10-year Treasuries advanced seven basis points to 4.68%
- Germany’s 10-year yield advanced four basis points to 2.78%
- Britain’s 10-year yield advanced five basis points to 4.44%
Commodities
- Brent crude fell 0.4% to $90.50 a barrel
- Spot gold fell 1.1% to $1,912.28 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Pearl Liu.
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