(Bloomberg) — Global markets were rocked by reports of fresh conflict in the Middle East that sent stocks lower while oil and haven assets including Treasures and the dollar rallied.
Most Read from Bloomberg
Gains for Treasuries sent the 10-year yield around 10 basis points lower, undoing recent selling pressure. An index of the dollar rose, while other havens including the Swiss franc, yen and gold also strengthened.
Oil prices jumped more than 3% with Brent crude briefly topping $90 per barrel, and West Texas Intermediate spiking to nearly $86 per barrel.
The action centered on unconfirmed reports of explosions in Iran, Iraq and Syria, which come amid expectations Israel would respond to attacks from Iran last weekend.
Futures contracts for the S&P 500 and Nasdaq 100 fell more than 1% after the underlying benchmarks fell for a fifth session on Thursday, amid repricing of Federal Reserve interest rate cut expectations. Asian equities also dropped Friday. Japan and South Korean shares declined more than 2%, while Australian and Hong Kong shares slid more than 1%. Mainland China benchmarks were mixed.
“The escalation in geopolitical risks was unexpected,” said Charu Chanana, a strategist at Saxo Capital Markets. “Semiconductor earnings have a huge task ahead to counter this increasing risk-off environment, with geopolitical escalations also mudding the outlook.”
Taiwan Semiconductor Manufacturing Co. dropped after the company revised down the revenue growth outlook for the semiconductor industry, citing a softer recovery across smartphone and personal computer sectors. Infosys Ltd. slumped in the US after forecasting tepid sales growth for the year.
Japanese inflation data released Friday came in below economists’ estimates. An increasing number of economists expect the BOJ to raise rates again in October after it stands pat next week, with most of them flagging an earlier move in July as a risk scenario, according to a Bloomberg survey.
New York Fed President John Williams said while it isn’t his baseline expectation to hike interest rates, it’s possible — if warranted. His Atlanta counterpart Raphael Bostic said he doesn’t think it will be appropriate to ease until toward the end of 2024. The Fed may hold rates steady all year, Minneapolis Fed chief Neel Kashkari told Fox News Channel.
The market’s biggest worry right now is re-accelerating inflation, according to Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.
“We are firmly in the camp of no rate cuts in 2024,” he said. “We believe investors should prepare for a higher-for-longer regime when it comes to both inflation and interest rates and that investment portfolios should be positioned for these dynamics for the foreseeable future.”
Most emerging market Asian currencies fell. Indonesia’s rupiah will be closely watched when trading resumes after the government asked state-owned firms to refrain from big dollar purchases in expectation the currency will weaken further.
Elsewhere, gold’s advance got boosts from demand from central banks and Chinese consumers.
Israel received its first-ever sovereign downgrade as S&P Global Ratings lowered its credit rating to A+ from AA- on heightened geopolitical risks for the region, even before Friday’s reports of turmoil.
Key events this week:
-
BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
-
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
-
S&P 500 futures fell 1.3% as of 11 a.m. Tokyo time
-
Nasday 100 futures fell 1.6%
-
Japan’s Topix fell 2.3%
-
Australia’s S&P/ASX 200 fell 1.5%
-
Hong Kong’s Hang Seng fell 1.2%
-
The Shanghai Composite was little changed
-
Euro Stoxx 50 futures fell 2.2%
Currencies
-
The Bloomberg Dollar Spot Index rose 0.2%
-
The euro fell 0.2% to $1.0620
-
The Japanese yen rose 0.3% to 154.18 per dollar
-
The offshore yuan was little changed at 7.2568 per dollar
Cryptocurrencies
-
Bitcoin fell 4.1% to $60,938.5
-
Ether fell 4.5% to $2,933.15
Bonds
-
The yield on 10-year Treasuries declined 10 basis points to 4.53%
-
Japan’s 10-year yield declined four basis points to 0.825%
-
Australia’s 10-year yield declined four basis points to 4.24%
Commodities
-
West Texas Intermediate crude rose 3.2% to $85.35 a barrel
-
Spot gold rose 1.3% to $2,410.27 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Cheng.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
Source link
