Oil, gold and bonds gain on conflict in the Middle East while stocks fall

SYDNEY/LONDON (Oct 9) (Reuters) – Conflict in the Middle East sent oil, gold and safe-haven government bond prices higher and hurt global stocks and Israeli assets on Monday after Friday’s US jobs report for September raised risks to… Interest rates relative to inflation numbers later in the year. the week.

Israeli government bonds fell, with the 2120 100-year bond falling by 5.3 cents on the dollar, hitting a record low. The shekel fell to its lowest levels since 2016 at 3.9880 to the dollar, prompting the country’s central bank to offer to sell up to $30 billion in foreign currency to maintain stability.

This helped the shekel reduce its losses to 3.924, while the central bank also said it would provide liquidity to the markets as needed.

Israel bombed the Palestinian Gaza Strip on Sunday, killing hundreds of people in response to one of the deadliest attacks in its history when the Islamist Hamas movement killed 700 Israelis and kidnapped dozens more.

“The uncertainty about what this means for the region means that oil is rising, there is a bit of risk aversion, so bond markets are performing and equity markets are down a bit,” said Peter Schaffrick, chief European macroeconomist. Strategist at RBC Capital Markets.

To achieve a broader or lasting impact, he said, the conflict would likely need to escalate beyond Israel’s borders.

“You can’t help but feel sympathy for the people on the ground, but the market, if it doesn’t impact the broader economy, can easily ignore things.”

Brent crude rose as much as $4 a barrel at one point and was last trading up about $3, or 3.55%, at $87.61.

US S&P 500 futures fell 0.6%, and Europe’s main STOXX 600 index lost 0.3%. (.Stokes)

The cautious mood was a balm for sovereign bonds after the recent sell-off and 10-year Treasury futures rose 13 points. The cash Treasury market is closed on Monday for Columbus Day.

The yield on German 10-year bonds fell by as much as 6 basis points to 2.83%, retreating from a 12-year high last week.

Gold demand was also up about 1% to $1,850 an ounce.

Fed focus

The conflict in the Middle East comes at a time when markets are experiencing a state of tension, with bond yields around the world reaching their highest levels in several years.

A combination of capitulation by asset managers who held long-term government bonds, rising oil prices, a flood of supply of government and corporate bonds, and investors finally accepting that central banks would keep interest rates high for a long time, led to a bond selloff.

Friday’s US jobs report added to the view of higher interest rates in the longer term, and investor attention now turns to September consumer price data on Thursday.

The median forecast is for a 0.3% increase in both headline and core measures, which should see the annual pace of inflation slow slightly.

Minutes from the Federal Reserve’s latest meeting are also scheduled to be released this week, and should help gauge how serious members are about keeping interest rates high, or even raising them again.

Fed funds futures indicate an 86% probability that the Fed will hold interest rates in November, with about 75 basis points of cuts expected for 2024.

China returns from vacation this week with a deluge of data including consumer and producer inflation, trade, credit and lending growth.

There is also the latest turmoil in the country’s real estate market to keep an eye on. Troubled developer Country Garden (2007.HK) may announce a restructuring of its overseas debt soon, local media reported, while bondholders of Chinese peer Evergrande Group (3333.HK) raised concerns about a potential liquidation as its debt plans falter.

News from the Middle East could spoil the start of US corporate earnings season as 12 S&P 500 companies will report results this week including JPMorgan, Citi and Wells Fargo.

In the currency markets, the main gainers were the Japanese yen, the Swiss franc and the US dollar, although the major currencies also found support.

The dollar index, which measures the performance of the US currency against six other major currencies, rose by 0.27% to 106.4, while the euro fell by 0.65% against the Japanese currency to 157.0 yen. ,

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