(Bloomberg) — Oil and gold prices declined, along with government bonds, as demand for safe-haven assets decreased due to Israel’s cautious military action in Gaza.
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Brent crude fell below $90 a barrel, following a nearly 3% increase on Friday, while WTI dropped towards $84. S&P 500 futures contracts saw a 0.3% gain after a 0.5% decline on Friday. Investor sentiment was negatively impacted by concerns such as the Federal Reserve’s persistently hawkish stance and underwhelming corporate earnings.
The dollar remained relatively unchanged against major currencies, while the 10-year Treasury yield rose by over three basis points. Gold prices slipped slightly but remained above $2,000 an ounce, and Australian bond yields edged higher.
“As the conflict in the Middle East continues, we are monitoring the potential clash between tight financial conditions and geopolitical risk aversion,” commented Eric Robertsen, Global Head of Research and Chief Strategist at Standard Chartered Plc. “Currently, it is the volatility in interest rates that is leading to outflows from emerging market assets and developed market equities.”
Australian and Japanese equities experienced declines, while Chinese shares opened with mixed performance. China Evergrande Group’s shares slumped, despite receiving an adjournment on a winding-up hearing to December 4. In Hong Kong, Chinese bank stocks weighed on the market, with Bank of Communications and ICBC experiencing notable declines.
On the positive side, China’s electric vehicle (EV) sector delivered strong results, as Great Wall Motor’s shares jumped 7.2% in Hong Kong.
Markets in the Middle East exhibited little panic following Israel’s military action in Gaza. Israel’s TA-35 stock index rose by 1.3%, reducing its loss to 11% since the Hamas infiltration on October 7.
Instead of an aggressive ground invasion, the Israeli military has taken a cautious approach, considering casualties, concerns of conflict spreading to Hezbollah in the north, and internal political pressures faced by Prime Minister Benjamin Netanyahu.
“Israel’s ground offensive into Gaza is unlikely to have a significant long-term impact on asset markets, unless the conflict spreads to other regions like Iran,” said Spencer Hakimian, founder of hedge fund Tolou Capital Management in New York.
Since the end of July, the global stock market has lost $12 trillion in value due to concerns over central banks’ “higher-for-longer” interest rate policies tipping the global economy into a recession.
The VIX index, often referred to as Wall Street’s fear gauge, has risen above 21 from around 13 in mid-September but remains below the mid-20s levels seen in March when the collapse of several regional banks triggered a market rout.
This week features several potentially influential events, including central bank meetings in Japan, the US, and the UK.
On Wednesday, the US Treasury Department will unveil its quarterly bond sales plan, a decision that could determine whether 10-year Treasury yields have the momentum to continue rising after reaching a 16-year high last week. The week will conclude with the release of the US payroll report, which may show a slowdown in job and wage growth last month.
Key events this week:
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China’s key financial policy gathering day, a rare closed-door event led by Chinese President Xi Jinping, begins on Monday.
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On Tuesday, Japan will release unemployment, industrial production, and retail sales data, along with a rate decision by the Bank of Japan.
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Also on Tuesday, China will publish non-manufacturing PMI and manufacturing PMI data, while the Eurozone will release CPI and GDP figures.
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Wednesday will bring US construction spending data, ISM Manufacturing figures, and job openings, along with the US Treasury’s quarterly refunding announcement and a rate decision by the Federal Reserve.
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On Thursday, the Bank of England will announce its rate decision.
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Friday will feature China Caixin services PMI data and Eurozone unemployment figures, along with US unemployment and nonfarm payrolls data.
Here are the main market moves:
Stocks
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S&P 500 futures rose 0.3% as of 12:21 p.m. Tokyo time, following a 0.5% decline in the S&P 500 Index on Friday.
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Japan’s Topix fell by 1%.
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Australia’s S&P/ASX 200 dropped 0.6%.
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Hong Kong’s Hang Seng declined by 0.5%.
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The Shanghai Composite remained relatively unchanged.
Currencies
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The Bloomberg Dollar Spot Index was relatively unchanged.
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The euro remained steady at $1.0560.
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The Japanese yen remained relatively unchanged at 149.59 per dollar.
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The offshore yuan remained steady at 7.3282 per dollar.
Cryptocurrencies
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Bitcoin declined by 0.9% to $34,287.2.
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Ether fell by 0.8% to $1,783.25.
Bonds
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The yield on 10-year Treasuries increased by three basis points to 4.87%.
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Japan’s 10-year yield remained relatively unchanged at 0.870%.
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Australia’s 10-year yield increased by six basis points to 4.87%.
Commodities
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West Texas Intermediate crude oil fell by 1.3% to $84.39 a barrel.
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Spot gold prices declined by 0.2% to $2,001.70 an ounce.
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael G. Wilson, Tassia Sipahutar, and Ye Xie.
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