(Bloomberg) — Government bonds rallied as investors sought refuge on signs that Israel is preparing for a ground invasion of the Gaza Strip. Crude oil rose while stocks and U.S. stock futures fell.
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The 10-year U.S. Treasury yield fell eight basis points, paring some of Thursday’s sharp rise on warmer-than-expected U.S. consumer price data. European bonds also rose, with the yield on 10-year German government bonds falling by seven basis points. Crude oil rose 3.6% in New York, rising above $86 a barrel on fears the war between Israel and Hamas could destabilize the Middle East and hit global supplies.
According to Bloomberg Economics, an escalation of Israel’s war with Hamas that includes Iran could send crude oil prices rising to $150 a barrel and reduce global economic output by about $1 trillion. Meanwhile, the prospect of higher US interest rates in the longer term also weighed on risk appetite. Swap contracts raised the likelihood of another quarter-point interest rate hike by the Federal Reserve to about 40% – from closer to 30% on Wednesday.
“Bonds are rallying ahead of the weekend as traders likely look to hedge against geopolitical risks,” said Christophe Barraud, chief economist and strategist at Market Securities LLP.
S&P 500 futures pared declines after JPMorgan Chase & Co. started the earnings season with mostly better-than-expected results, while provisions for loan losses came in lower than analysts estimated. Stocks slipped. Wells Fargo & Co. rose 1.9% after the company reported a decline in sales. Citigroup Inc. is next up on Friday.
Among other things, The Boeing Co. fell ahead of the launch after Ryanair Holdings Plc said delivery delays on 737 Max planes had worsened as the plane maker struggled with quality control issues from its suppliers.
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The Stoxx Europe 600 fell about 0.9%, although profits from oil majors tempered the benchmark’s decline. Among individual switchers, Tryg A/S rose after the Danish insurer reported a decline in profits. Ubisoft Entertainment rose after the UK agreed to Microsoft Corp.’s deal. agreed to purchase Activision Blizzard Inc., which would see the sale of some gaming rights to the French video game maker.
Sartorius AG plunged after the electronics maker cut its forecasts. Danish power producer Orsted A/S collapsed after New York regulators rejected higher tariffs for projects being developed jointly with the state.
MSCI’s All Country World Index fell for a second day, with major Asian benchmark indices in the red. Hong Kong shares underperformed and stocks in mainland China fell after both consumer and producer prices came in below estimates, a sign that the country’s economy is still facing strains despite the introduction of a series of support measures .
China’s trade data was only slightly better than expected. Authorities are now also considering setting up a government-backed stabilization fund to boost confidence in the country’s $9.5 trillion stock market.
Important events this week:
University of Michigan Consumer Sentiment, Friday
The G20 finance ministers and central bankers will meet on Friday at the IMF meeting
ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak at the IMF panel on Friday
The Fed’s Patrick Harker speaks on Friday
Some of the key moves in the markets:
Shares
S&P 500 futures fell 0.2% at 7:03 a.m. New York time
Nasdaq 100 futures fell 0.4%
The futures on the Dow Jones Industrial Average hardly changed
The Stoxx Europe 600 fell 0.7%
The MSCI World Index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0515
The British pound fell 0.1% to $1.2161
The Japanese yen rose 0.1% to 149.62 per dollar
Cryptocurrencies
Bitcoin rose 0.1% to $26,773.1
Ether rose 0.6% to $1,544.49
Tie up
The 10-year Treasury yield fell eight basis points to 4.61%
The 10-year German government bond yield fell seven basis points to 2.71%
The 10-year UK government bond yield fell five basis points to 4.37%
raw materials
West Texas Intermediate crude oil prices rose 3.8% to $86.02 a barrel
Gold futures rose 1% to $1,901.90 an ounce
This story was produced with support from Bloomberg Automation.
– With support from James Hirai, Michael Msika and Tassia Sipahutar.
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