Stocks Fall, Oil Gains as Mideast Tension Rises: Markets Wrap

(Bloomberg) — European stocks declined along with US equity futures as the risk of escalating conflict in the Middle East damped risk appetite ahead of economic data that may shed more light on the Federal Reserve’s policy path. Crude oil extended gains.

The Stoxx Europe 600 index fell about 0.7%, with all industry sectors in the red. Contracts on the S&P 500 and Nasdaq 100 suggested a lower open on Wall Street, with US-listed China stocks sliding after big gains this week. Bloomberg’s dollar index gained for a fourth day, bolstered by a rise in Treasury yields. 

Global equities are on course for their first weekly loss in four as the world awaits Israel’s response to a missile strike by Iran. Israel’s warplanes bombed Beirut overnight, after eight of its soldiers were killed in southern Lebanon in battles against Hezbollah. Amid the geopolitical uncertainty, investors are also awaiting a raft of US data — including Friday’s key payrolls report — for signals on health of the economy.

“Although the conflict in the Middle East is a negative event, from the market perspective that will be secondary to how the growth trajectory and the easing policy of the Fed are impacting bond yields,” said Ashok Bhatia, co-chief investment officer for fixed income at Neuberger Berman. 

Reports on weekly unemployment claims

Brent crude oil rose for a fifth day, climbing toward $75 a barrel. Investors are concerned that, should Israel strike key Iranian assets, the Islamic Republic will lash out and escalate their conflict, dragging in more countries and potentially disrupting global energy shipments.

“The question has been about how aggressive Israel’s response will be and whether energy infrastructure will be impacted,” said Jun Rong Yeap, a market strategist at IG Asia Pte.

Among single stocks, Levi Strauss shares slumped in premarket trading after the apparel company lowered its revenue growth outlook for the full year.

In Europe, companies are facing additional headwinds. France’s CAC 40 stock benchmark underperformed, falling as much as 1%, after French President Emmanuel Macron endorsed a temporary tax on the country’s largest companies. German software maker SAP SE declined after US prosecutors broadened a probe of potential price-fixing. Stellantis NV shares were down more than 3% after the company slashed vehicle production in its key Italian market. 

The pound was on course for its worst day against the euro since 2022 after the Guardian reported Bank of England Governor Andrew Bailey saying the central bank could be a “bit more aggressive” with interest-rate cuts. Money markets fully priced in a quarter-point cut by the BOE in November and assigned a 70% probability to a reduction in December, an increase from about 40% Wednesday.

The strengthening dollar is adding to the pressure on the yen as stronger-than-expected ADP jobs data on Wednesday led traders to pare bets on aggressive Fed rate cuts. Swaps traders were penciling in some 33 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week. 

Key events this week: 

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.7% as of 10:28 a.m. London time
• S&P 500 futures fell 0.3%
• Nasdaq 100 futures fell 0.4%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The MSCI Asia Pacific Index fell 0.6%
• The MSCI Emerging Markets Index fell 1.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro was unchanged at $1.1045
• The Japanese yen fell 0.3% to 146.93 per dollar
• The offshore yuan was little changed at 7.0426 per dollar
• The British pound fell 1.1% to $1.3120

Cryptocurrencies

• Bitcoin fell 0.5% to $60,630.16
• Ether fell 1.6% to $2,348.35

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.81%
• Germany’s 10-year yield advanced five basis points to 2.14%
• Britain’s 10-year yield was little changed at 4.02%

Commodities

• Brent crude rose 1.2% to $74.80 a barrel
• Spot gold fell 0.5% to $2,644.30 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, John Cheng and Chiranjivi Chakraborty.

©2024 Bloomberg L.P.