Stocks struggled for direction and bonds trimmed a decline as investors kept a close eye on diplomatic efforts to contain the Israel-Hamas war, including a visit to the region by US President Joe Biden planned for Wednesday.
(Bloomberg) — Stocks struggled for direction and bonds trimmed a decline as investors kept a close eye on diplomatic efforts to contain the Israel-Hamas war, including a visit to the region by US President Joe Biden planned for Wednesday.
Europe’s Stoxx 600 Index and futures contracts for US equities kept to narrow ranges as traders prepared for a flurry of major earnings, including Goldman Sachs Group Inc., Bank of America Corp. and Johnson & Johnson.
Shares in Ericsson AB slumped more than 9% after the Swedish 5G-equipment maker warned of persisting weak demand. Rolls Royce Holdings Plc rose after the jet engine maker announced plans to cut jobs and streamline its business. Poland’s stocks and currency extended gains following Sunday’s elections, which gave pro-European Union parties a majority in parliament.
Yields on the US 10-year benchmark rose beyond 4.7%, but were off their highs for the day. The dollar strengthened, while Israel’s shekel extended its decline after sliding past 4 against the greenback on Monday. Brent crude oil traded near $90 a barrel.
Biden is set to travel to Israel Wednesday as part of a push to prevent the conflict from spreading. Secretary of State Antony Blinken also returned to Israel to meet Prime Minister Benjamin Netanyahu, after talks with Arab governments. Russian President Vladimir Putin held a call with the leaders of Egypt, Syria, Iran and the Palestinian Authority.
“Markets fear a ground offensive by Israel that could ignite a larger and more complicated regional conflict that risks regional supply chains, energy output, economic growth and financial stability,” said Kyle Rodda, senior market analyst at Capital.com. “The presence of President Biden in the region potentially lowers the odds of such an offensive in the coming days, providing markets with some breathing room, if only for a small window.”
Read more: Is Market Calm on the Mideast Right, or Dangerous?: John Authers
Elsewhere, the pound weakened after UK wage growth slipped, suggesting a cooling of labor-market pressures that will make it easier for the Bank of England to keep interest rates on hold next month.
Investors will be closely watching the next batch of corporate results, after Wall Street strategists warned that the outlook for earnings is weakening. Goldman Sachs and Bank of America take center stage after JPMorgan Chase & Co., the largest US bank, posted its latest quarter of record net interest income and boosted its forecast for the year at the end of last week, while Citigroup Inc.’s results topped analyst estimates.
An update is also due Tuesday from United Airlines Holdings Inc. before Netflix Inc. and Tesla Inc. kick off tech-related earnings on Wednesday.
On top of geopolitics and earnings, traders are tracking comments from a slew of Federal Reserve speakers this week before a blackout period in the lead-up to the central bank’s November rate-setting meeting. Philadelphia Fed President Patrick Harker on Monday repeated comments he made last week asserting the central bank can hold its benchmark rate steady as long as there is not a sharp turn in the economic data.
Pessimism around the economic outlook is driving investors to cash, according to Bank of America’s global fund manager survey. The broadest measure of sentiment — based on cash positions, equity allocation and economic predictions — fell in the October poll after showing an improvement in the summer months, BofA strategists led by Michael Hartnett wrote in a note. Cash levels as a percentage of assets under management have climbed above 5%.
A net 50% of investors in the BofA survey expect a weaker global economy over the next 12 months, with more concerned about a hard landing than previously. At the same time, the soft landing of a “Goldilocks” scenario remains the base case. Most surveyed remain convinced the Fed has finished its rate-hiking cycle.
Key events this week:
- Chinese President Xi Jinping hosts world leaders at the Belt and Road Initiative forum from Tuesday to Wednesday, with Russian President Vladimir Putin expected to attend
- Joint European Central Bank/IMF policy and research conference, Tuesday
- US retail sales, business inventories, industrial production, Tuesday
- Goldman Sachs, Bank of America earnings, Tuesday
- New York Fed President John Williams moderates discussion, while Richmond Fed President Tom Barkin speaks at a separate event, Tuesday
- Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday
- China GDP, retail sales, industrial production, Wednesday
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- Morgan Stanley, Netflix, Tesla earnings, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
- Australia unemployment, Thursday
- Japan trade, Thursday
- China property prices, Thursday
- US initial jobless claims, existing home sales, leading index, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
- The Stoxx Europe 600 was little changed as of 10:26 a.m. London time
- S&P 500 futures fell 0.1%
- Nasdaq 100 futures fell 0.1%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The MSCI Asia Pacific Index rose 0.6%
- The MSCI Emerging Markets Index rose 0.5%
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0551
- The Japanese yen fell 0.1% to 149.68 per dollar
- The offshore yuan fell 0.2% to 7.3221 per dollar
- The British pound fell 0.4% to $1.2164
- Bitcoin was little changed at $28,393.45
- Ether was little changed at $1,587.9
- The yield on 10-year Treasuries advanced four basis points to 4.75%
- Germany’s 10-year yield advanced two basis points to 2.81%
- Britain’s 10-year yield was little changed at 4.48%
- Brent crude rose 0.1% to $89.78 a barrel
- Spot gold rose 0.1% to $1,922.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Toby Alder, Tassia Sipahutar, Robert Brand and Sujata Rao.
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