(Bloomberg) — Oil slipped with gold and government bonds as investors unwound some of the geopolitical risk premium factored into global markets after Israel’s escalation of military operations in Gaza proceeded more cautiously than had been anticipated.
Most Read from Bloomberg
Brent crude dropped below $90 a barrel, after rising by almost 3% on Friday, while WTI fell toward $84. S&P 500 futures contracts rose 0.3% after the gauge fell 0.5% on Friday, with risk appetite dented over worries including a persistently hawkish Federal Reserve and underwhelming corporate earnings.
The dollar was little changed against major peers, while the 10-year Treasury yield rose about three basis points. Gold slipped but remained above $2,000 an ounce, while US and Australian bond yields edged higher.
“As the conflict in the Middle East continues, we are on watch for a collision course between tight financial conditions and geopolitically driven risk aversion,” Eric Robertsen, global head of research and chief strategist at Standard Chartered Plc, wrote in a note to clients. “For the moment, it is rates volatility that is driving outflows from emerging market assets and developed market equities.”
Australian and Japanese equities fell, while shares opened mixed in China. Shares of China Evergrande Group slumped as the world’s most indebted developer faces a make-or-break moment Monday at a court hearing on creditor requests for liquidation.
Middle Eastern markets that opened on Sunday showed little sign of panic a day after Israel sent troops and tanks into the northern Gaza Strip. Israel’s TA-35 stock index rose 1.3%, trimming its loss to 11% since the Hamas infiltration on Oct. 7.
Instead of a massive ground invasion, the Israeli military has started slowly, taking a day-by-day approach based on casualties, concerns of the conflict spreading to Hezbollah in the north and internal political pressures on Prime Minister Benjamin Netanyahu.
“Israel’s ground offensive into Gaza will likely have limited long-term impact on asset markets, unless the conflict were to spread into other regions, such as Iran,” said Spencer Hakimian, founder of hedge fund Tolou Capital Management in New York.
The global stock market has lost $12 trillion in value since the end of July as concern mounts that central banks’ “higher-for-longer” interest-rate policies may tip the global economy toward a recession.
The VIX index, known as Wall Street’s fear gauge has risen to above 21 from around 13 in mid-September, but remains well below the 27 level hit in March when the collapse of several regional banks set off a market rout.
The week includes a slew of potentially market-moving events, including central bank meetings in Japan, US and the UK.
On Wednesday, the US Treasury Department will unveil its quarterly bond sales plan, an announcement that may determine whether the 10-year Treasury yields have the momentum to keep rising after surging to a 16-year high last week. The week will end with the US payroll report that may show job and wage growth slowed last month.
Key events this week include:
-
China’s key financial policy gathering day, a rare closed door event led by Chinese President Xi Jinping starts, Monday
-
Japan unemployment, industrial production, retail sales, Tuesday
-
Bank of Japan rate decision, Tuesday
-
China non-manufacturing PMI, manufacturing PMI, Tuesday
-
Eurozone CPI, GDP, Tuesday
-
US construction spending, ISM Manufacturing, job openings, Wednesday
-
US Treasury quarterly refunding announcement, Wednesday
-
Federal Reserve rate decision, Wednesday
-
Bank of England rate decision, Thursday
-
China Caixin services PMI, Friday
-
Eurozone unemployment, Friday
-
US unemployment, nonfarm payrolls, Friday
Here are some of the main moves in markets:
Stocks
-
S&P 500 futures rose 0.3% as of 10:31 a.m. Tokyo time. S&P 500 Index fell 0.5%
-
Japan’s Topix fell 1%
-
Australia’s S&P/ASX 200 fell 0.5%
-
Hong Kong’s Hang Seng fell 0.6%
-
The Shanghai Composite fell 0.2%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro was little changed at $1.0561
-
The Japanese yen was little changed at 149.72 per dollar
-
The offshore yuan was little changed at 7.3269 per dollar
Cryptocurrencies
-
Bitcoin fell 0.2% to $34,524.04
-
Ether was little changed at $1,797.44
Bonds
-
The yield on 10-year Treasuries advanced three basis points to 4.86%
-
Japan’s 10-year yield was little changed at 0.870%
-
Australia’s 10-year yield advanced five basis points to 4.86%
Commodities
-
West Texas Intermediate crude fell 0.7% to $84.96 a barrel
-
Spot gold fell 0.1% to $2,003.38 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael G. Wilson, Tassia Sipahutar and Ye Xie.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
Read More: Oil, Bonds Fall as Investors Temper Mideast Hedges: Markets Wrap