(Bloomberg) — European stocks and U.S. stock futures fluctuated while government bonds fell as cautious traders tracked efforts by the U.S. and its allies to prevent further escalation of the Israel-Hamas conflict.
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Technology stocks were among the losers in Europe after Bloomberg News reported that the U.S. is considering further restrictions to limit China’s access to advanced semiconductors. Energy stocks were boosted by recent increases in oil prices, with Shell Plc hitting a record high. Polish stocks rose the most since May 2022 and the zloty rallied as a bloc of pro-European opposition parties appeared on track to topple the nationalist government.
Markets were slightly firmer on Monday following last week’s safe-haven rush as investors await further developments in the Middle East. The conflict is an additional problem for traders already busy interpreting the outlook for the economy and interest rates just as the latest earnings reporting season is in full swing.
S&P 500 and Nasdaq 100 contracts were little changed following declines on Wall Street late last week. 10-year Treasury yields rose, partially recouping last week’s 19 basis point decline. Brent crude fell and is still trading above $90 a barrel after rising nearly 6% on Friday. Gold fell 1%.
“Geopolitical tensions in the Middle East continue to be the focus of the market,” said Luke Hickmore, investment director at Abrdn Investment Management. “It may seem calmer now, but if the war spreads to other parts of the region that will mean more pressure on oil and more uncertainty for the market to deal with. It’s going to be a big driver here.”
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U.S. officials rushed to talk to Middle Eastern countries – including back-channel talks with Iran – to contain the conflict. A greater escalation could bring Israel into direct conflict with Iran, a supplier of arms and money to Hamas, which is classified as a terrorist group by the US and EU.
In other individual stock moves, Pfizer Inc. fell in U.S. premarket trading after the pharmaceutical giant cut its sales and profit forecasts. Manchester United Plc slumped 18% after Bloomberg News reported that a Qatari investor group had withdrawn its bid to buy the English soccer club.
In Asia, a gauge of the region’s stocks fell as stocks in mainland China fell despite the central bank making its biggest medium-term liquidity injection since 2020.
Headwinds in China’s markets are increasing. The US has taken steps to tighten restrictions on advanced chip technology and concerns about the mainland’s real estate sector continue. The People’s Bank of China on Monday injected a net 289 billion yuan ($39.6 billion) through a medium-term credit facility and kept the key interest rate unchanged at 2.5%.
The US said it would tighten sweeping measures restricting China’s access to advanced semiconductors and chip-making equipment to prevent its geopolitical rival from gaining a military advantage.
Elsewhere, the dollar’s strength indicator fell slightly, while the New Zealand dollar led gains among major currencies after the country elected a center-right government on Saturday.
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Traders are also keeping a close eye on the latest economic data and analyzing comments from central bank officials for clues on the policy outlook. Federal Reserve Bank of Philadelphia President Patrick Harker said disinflation was underway and reiterated his preference for interest rates to remain where they are unless data changes drastically, despite a rise in inflation expectations of US consumers for the coming year in early October.
Key global economic updates this week include Chinese growth numbers and inflation readings in Japan, Britain and the euro zone. Meanwhile, Fed Chairman Jerome Powell is due to speak following a series of better-than-expected data.
“There is still a lot of macroeconomic uncertainty,” said Nikolaos Panigirtzoglu, global strategist at JPMorgan Chase & Co. “Markets have priced in high recession risk in 2022 and priced it out in 2023 given the lack of a recession this year and “It’s now underway.” We’re in waiting mode, trying to assess whether there could be a recession in 2024.”
Important events this week:
Russian Foreign Minister Sergei Lavrov is visiting China on Monday
US Treasury Secretary Janet Yellen will meet with euro zone finance ministers in Luxembourg on Monday
François Villeroy de Galhau, member of the Governing Council, speaks on Monday
Huw Pill, chief economist at the Bank of England, speaks on Monday
US Empire Manufacturing Index, Monday
Philadelphia Fed President Patrick Harker speaks Monday
Chinese President Xi Jinping is hosting world leaders at the Belt and Road Forum in Beijing, which Russian President Vladimir Putin will also attend on Tuesday
Germany ZEW survey expectations, Tuesday
UK Jobless Claims, Unemployment, Tuesday
European Central Bank-IMF Joint Policy and Research Conference, Tuesday
US retail sales, corporate inventories, industrial production, cross-border investment, Tuesday
Goldman Sachs, Bank of America results, Tuesday
New York Fed President John Williams will moderate the discussion, while Richmond Fed President Tom Barkin will speak at a separate event on Tuesday
Reserve Bank of Australia Governor Michele Bullock speaks on Wednesday
China’s GDP, retail sales, industrial production, Wednesday
UK CPI, Wednesday
Eurozone CPI, Wednesday
Morgan Stanley, Netflix, Tesla earnings, Wednesday
The Federal Reserve will release an economic survey in the Beige Book on Wednesday
Philadelphia Fed President Patrick Harker and New York Fed President John Williams will speak at separate events on Wednesday
Unemployment in Australia, Thursday
Japan trading, Thursday
Property prices in China, Thursday
Initial jobless claims in the US, Thursday
Federal Reserve Chairman Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker and Dallas Fed President Lorie Logan speak on Thursday various events
Japanese CPI, Friday
Key interest rates for Chinese loans, Friday
President Joe Biden will receive European Union representative Ursula von der Leyen in Washington on Friday
Philadelphia Fed President Patrick Harker speaks Friday
Some of the key moves in the markets:
Shares
The Stoxx Europe 600 was little changed at 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
Tie up
The 10-year Treasury yield rose seven basis points to 4.68%
The 10-year German government bond yield rose four basis points to 2.78%
The 10-year UK government bond yield rose five basis points to 4.44%
raw materials
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 support from Bloomberg Automation.
– With assistance from Matthew Burgess and Pearl Liu.
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