Treasuries rallied as investors turned to havens on signs Israel is preparing for a ground invasion of Gaza. Crude oil surged.
(Bloomberg) — Treasuries rallied as investors turned to havens on signs Israel is preparing for a ground invasion of Gaza. Crude oil surged.
The 10-year Treasury yield dropped 10 basis points, paring some of Thursday’s sharp rise in the wake of hotter-than-expected US consumer price data. European bonds also gained, with the German 10-year yield falling seven basis points. Crude oil climbed more than 4% in New York, rising above $86 a barrel on fears the Israel-Hamas war could destabilize the Middle East and crimp global supply.
An escalation of Israel’s war with Hamas, drawing in Iran, could send crude oil to $150 a barrel and cut about $1 trillion off world economic output, according to Bloomberg Economics. Meanwhile, the prospect of higher-for-longer US interest rates also weighed on risk appetite. Swap contracts pushed the odds of another quarter-point Federal Reserve hike to about 40% — from closer to 30% Wednesday.
“Bonds are rallying ahead of the weekend as traders likely want to hedge geopolitical risk,” said Christophe Barraud, chief economist and strategist at Market Securities LLP.
Futures on the S&P 500 erased losses after major US banks kicked of the reporting season with mostly positive results. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. gained in premarket trading after earnings beats. Data showing that import prices rose less than expected in September also lifted the mood. The dollar slipped.
Among other US premarket movers, The Boeing Co. fell after Ryanair Holdings Plc said delivery delays of 737 Max aircraft have worsened as the aircraft maker grapples with supplier quality-control issues. BlackRock Inc. declined after clients pulled a net $13 billion from long-term investment funds, the first outflows since the onset of the pandemic in 2020.
The Stoxx Europe 600 dropped about 0.8%, led by travel and leisure shares. The energy sector was the only one ini the green as oil majors gained. Among individual movers, Tryg A/S jumped after the Danish insurer reported an earnings beat. Ubisoft Entertainment advanced after the UK approved Microsoft Corp.’s deal to buy Activision Blizzard Inc., which will see the sale of some gaming rights to the French video-game maker.
Sartorius AG plunged after the electronics maker cut guidance. Danish power generator Orsted A/S slumped after New York regulators rejected higher rates for projects being developed alongside the state.
MSCI’s All Country World Index declined for a second day, with major Asian benchmark indexes in the red. Hong Kong shares underperformed and mainland Chinese shares slipped after both consumer and producer prices came in below estimates, a sign that the country’s economy still faces drags despite the government rolling out a series of support measures.
China’s trade data was only slightly better than expectations. The authorities are now also considering forming a state-backed stabilization fund to shore up confidence in the nation’s $9.5 trillion stock market.
Key events this week:
- US University of Michigan consumer sentiment, Friday
- G20 finance ministers and central bankers meet as part of IMF gathering, Friday
- ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday
- Fed’s Patrick Harker speaks, Friday
Some of the main moves in markets:
- S&P 500 futures were little changed as of 8:32 a.m. New York time
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 0.7%
- The MSCI World index fell 0.3%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0539
- The British pound rose 0.1% to $1.2191
- The Japanese yen rose 0.2% to 149.52 per dollar
- Bitcoin rose 0.5% to $26,876.14
- Ether rose 0.9% to $1,549.43
- The yield on 10-year Treasuries declined nine basis points to 4.60%
- Germany’s 10-year yield declined seven basis points to 2.72%
- Britain’s 10-year yield declined seven basis points to 4.36%
- West Texas Intermediate crude rose 4.5% to $86.63 a barrel
- Gold futures rose 1.5% to $1,911.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from James Hirai, Michael Msika and Tassia Sipahutar.
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