(Bloomberg) — Oil fell against gold and government bonds as demand for safe-haven assets weakened after Israel’s military action in Gaza was more cautious than expected.
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Brent crude fell below $90 a barrel after rising almost 3% on Friday, while WTI fell towards $84. S&P 500 futures contracts gained 0.3% after the index fell 0.5% on Friday as risk appetite was dampened by concerns such as a continued hawkish Federal Reserve and disappointing corporate earnings.
The dollar was little changed against major currencies, while the 10-year Treasury yield rose more than three basis points. Gold prices fell but remained above $2,000 an ounce and Australian bond yields rose slightly.
“As conflict continues in the Middle East, we are on the lookout for a collision course between tight financial conditions and geopolitically driven risk aversion,” wrote Eric Robertsen, global head of research and chief strategist at Standard Chartered Plc, in a note to clients. “Currently, it is interest rate volatility that is driving outflows from emerging market assets and developed market equities.”
Australian and Japanese shares fell, while stocks in China opened mixed. China Evergrande Group shares slumped even as the world’s most indebted developer got more breathing room on Monday as a Hong Kong court postponed a liquidation hearing until December 4. Hong Kong Supreme Court Justice Linda Chan said on Monday: “This is indeed the final adjournment,” the latest in a series of delays since the trial began last year.
Stocks in Hong Kong traded lower as Chinese banks weighed. Bank of Communications fell as much as 5.8% in Hong Kong after its third-quarter net profit fell 3% year-on-year, while ICBC fell as much as 1% in Hong Kong as analysts saw mixed earnings results.
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Meanwhile, China’s EV sector delivered some good news, with Great Wall Motor rising 7.2% in Hong Kong after stronger-than-expected results.
Markets across the Middle East that opened on Sunday showed little sign of panic, a day after Israel sent troops and tanks into the northern Gaza Strip. Israel’s TA-35 stock index rose 1.3%, narrowing its loss since Hamas’ October 7 infiltration to 11%.
Instead of a massive ground invasion, the Israeli military has started slowly, taking a day-by-day approach guided by casualties, concerns about the conflict spreading to Hezbollah in the north and internal political pressure on Prime Minister Benjamin Netanyahu.
“Israel’s ground offensive in Gaza is likely to have limited long-term impact on asset markets unless the conflict spreads to other regions such as Iran,” said Spencer Hakimian, founder of hedge fund Tolou Capital Management in New York.
The global stock market has lost $12 trillion in value since the end of July as concerns grow that central banks’ interest rate policies, which are “higher in the longer term,” could push the global economy into recession.
The VIX index, known as Wall Street’s fear gauge, has risen to over 21 from around 13 in mid-September but remains below its highs of mid-20s in March, when the collapse of several regional banks triggered a market crash.
The week features a number of potentially market-moving events, including central bank meetings in Japan, the US and the UK.
On Wednesday, the U.S. Treasury will unveil its quarterly bond sales plan, an announcement that could determine whether 10-year Treasury yields have the momentum to continue rising after rising to a 16-year high last week. The week ends with the U.S. payroll report, which could show that job and wage growth slowed last month.
This week’s key events include:
China’s most important fiscal policy day begins on Monday, a rare closed-door event led by Chinese President Xi Jinping
Japan unemployment, industrial production, retail sales, Tuesday
Bank of Japan interest rate decision, Tuesday
China Non-Manufacturing PMI, Manufacturing PMI, Tuesday
Eurozone CPI, GDP, Tuesday
US construction spending, ISM production, jobs, Wednesday
U.S. Treasury Department Quarterly Refund Announcement, Wednesday
Federal Reserve interest rate decision, Wednesday
Bank of England interest rate decision, Thursday
China Caixin Services PMI, Friday
Unemployment in the Eurozone, Friday
US unemployment, non-farm payrolls, Friday
Here are some of the key moves in the markets:
Shares
S&P 500 futures rose 0.3% at 12:21 p.m. Tokyo time. The S&P 500 Index fell 0.5% on Friday
Japan’s Topix fell 1%
Australia’s S&P/ASX 200 fell 0.6%
Hong Kong’s Hang Seng fell 0.5%
The Shanghai Composite has hardly been changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro remained little changed at $1.0560
The Japanese yen was little changed at 149.59 per dollar
The offshore yuan was little changed at 7.3282 per dollar
Cryptocurrencies
Bitcoin fell 0.9% to $34,287.2
Ether fell 0.8% to $1,783.25
Tie up
The 10-year Treasury yield rose three basis points to 4.87%
Japan’s 10-year yield was little changed at 0.870%
Australia’s 10-year yield rose six basis points to 4.87%
raw materials
West Texas Intermediate crude fell 1.3% to $84.39 a barrel
Spot gold fell 0.2% to $2,001.70 an ounce
This story was produced with support from Bloomberg Automation.
– With assistance from Michael G. Wilson, Tassia Sipahutar and Ye Xie.
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