European stocks and US equity futures took a hit due to escalating conflict in the Middle East, sending risk appetite plummeting. Crude oil prices continued to rise amidst the geopolitical tensions.
The Stoxx Europe 600 index dropped by 0.8%, with all sectors in negative territory. S&P 500 and Nasdaq 100 contracts indicated a lower opening for Wall Street. The Bloomberg dollar index saw gains for the fourth consecutive day, supported by an increase in Treasury yields.
Global equities are set for their first weekly loss in four as the world awaits Israel’s response to a recent missile strike by Iran. Israel conducted airstrikes in Beirut following clashes with Hezbollah in southern Lebanon. Investors are not only monitoring the Middle East situation but are also eager to see the Federal Reserve’s next move and its impact on the US economy.
While the conflict in the Middle East is concerning, market focus remains on the Fed’s easing policy and its effect on bond yields, according to Ashok Bhatia, co-chief investment officer for fixed income at Neuberger Berman.
Brent crude oil climbed towards $75 a barrel for the fifth consecutive day. There are concerns that any aggressive action from Israel could lead to further escalation with Iran, potentially disrupting global energy supplies.
In Europe, companies faced additional challenges. France’s CAC 40 index dropped by 1% after President Emmanuel Macron backed a temporary tax on large companies. German software giant SAP SE saw a decline following an expanded US probe into potential price-fixing. Stellantis NV shares also fell after the company reduced vehicle production in Italy.
The pound weakened, while UK stocks outperformed after reports of Bank of England Governor Andrew Bailey suggesting a more aggressive approach to interest rate cuts.
The strengthening dollar has put pressure on the yen, as traders adjust expectations for Fed rate cuts following strong ADP jobs data. Swaps traders are now anticipating a smaller rate cut at the central bank’s November meeting.
Key events this week include:
Stocks:
– Stoxx Europe 600 down 0.8%
– S&P 500 futures down 0.4%
– Nasdaq 100 futures down 0.5%
– Dow Jones Industrial Average futures down 0.4%
– MSCI Asia Pacific Index down 0.5%
– MSCI Emerging Markets Index down 1.2%
Currencies:
– Bloomberg Dollar Spot Index up 0.2%
– Euro unchanged at $1.1042
– Japanese yen unchanged at 146.57 per dollar
– Offshore yuan unchanged at 7.0407 per dollar
– British pound down 1% to $1.3131
Cryptocurrencies:
– Bitcoin down 0.9% to $60,365.22
– Ether down 2.2% to $2,332.91
Bonds:
– 10-year Treasury yield up two basis points to 3.80%
– Germany’s 10-year yield up four basis points to 2.13%
– Britain’s 10-year yield down two basis points to 4.00%
Commodities:
– Brent crude up 1.2% to $74.77 a barrel
– Spot gold down 0.6% to $2,643.45 an ounce
This article was created with the help of Bloomberg Automation.