Treasuries and Oil Jump on Israel-Hamas Conflict: Markets Wrap

(Bloomberg) — Treasuries rose as investors turned to safe havens amid signs that Israel is preparing for a ground invasion of Gaza. Crude oil rose.

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The 10-year Treasury yield fell by 10 basis points, paring some of Thursday’s sharp rise in the wake of hotter-than-expected US consumer price data. European bonds also rose, with the German 10-year yield falling seven basis points. Crude oil prices rose more than 4% in New York, rising above $86 a barrel amid fears that a war between Israel and Hamas will destabilize the Middle East and reduce global supplies.

Escalating Israel’s war with Hamas, and drawing in Iran, could send the price of crude oil to $150 a barrel and cut about $1 trillion from global economic output, according to Bloomberg Economics. At the same time, the prospect of higher US interest rates for a longer period affected risk appetite. The swap contracts increased the odds of a Fed hike by another quarter point to about 40% — from closer to 30% on Wednesday.

“Bonds are rising ahead of the weekend as traders will likely want to hedge geopolitical risks,” said Christophe Barraud, chief economist and strategist at Market Securities LLP.

S&P 500 futures erased losses after major U.S. banks started reporting season with mostly positive results. JPMorgan Chase & Co. shares rose. and Citigroup Inc. and Wells Fargo & Co. In pre-market trading after earnings beat. Data showing that import prices rose less than expected in September also lifted sentiment. The dollar fell.

Among other U.S. movers in the pre-market, Boeing fell after Ryanair Holdings Plc said delays in 737 MAX deliveries had worsened as the planemaker grappled with supplier quality control issues. BlackRock fell after clients withdrew a net $13 billion from long-term mutual funds, the first outflows since the start of the pandemic in 2020.

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The Stoxx Europe 600 index fell by about 0.8%, led by travel and leisure stocks. The energy sector was the only sector that started to rise as shares of major oil companies rose. Among individual companies, Tryg A/S jumped after the Danish insurer reported an increase in profits. Ubisoft Entertainment moved forward after the United Kingdom approved Microsoft Corp.’s deal to buy Activision Blizzard Inc., which will see some game rights sold to the French video game maker.

Sartorius AG shares fell after the electronics maker cut guidance. Danish power generation company Orsted A/S backed down after New York regulators rejected higher prices for projects being developed alongside the state.

The MSCI All-Country World Index fell for a second day, with major Asian indices in red. Hong Kong stocks underperformed and mainland Chinese stocks fell after consumer and producer prices came in below estimates, a sign that the country’s economy is still struggling despite the government rolling out a series of support measures.

Chinese trade data was slightly better than expected. Authorities are now also considering forming a state-backed stabilization fund to boost confidence in the country’s $9.5 trillion stock market.

Main events this week:

• Consumer confidence index from the University of Michigan, Friday

• Finance ministers and central bank governors of the G20 will meet within the framework of the International Monetary Fund meeting, on Friday

• European Central Bank President Christine Lagarde and International Monetary Fund Managing Director Kristalina Georgieva speak before an IMF committee on Friday.

• The Fed’s Patrick Harker speaks on Friday

Some key movements in the markets:

Stores

• S&P 500 futures were little changed as of 8:32 a.m. New York time

• Nasdaq 100 futures fell 0.2%

• Dow Jones Industrial Average futures rose 0.2%

• The Stoxx Europe 600 index fell by 0.7%.

• MSCI World Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%.

• The euro rose 0.1 percent to $1.0539

• The British pound rose 0.1 percent to $1.2191

• The Japanese yen rose 0.2 percent to 149.52 yen to the dollar

Digital currencies

• Bitcoin rose 0.5% to $26,876.14

• Ethereum rose 0.9% to $1,549.43

Bonds

• The yield on the 10-year Treasury note fell nine basis points to 4.60%.

• The yield on German 10-year bonds fell seven basis points to 2.72%.

• The yield on British 10-year bonds fell seven basis points to 4.36%.

Goods

• West Texas Intermediate crude rose 4.5% to $86.63 a barrel

• Gold futures rose 1.5% to $1,911.80 an ounce.

This story was produced with assistance from Bloomberg Automation.

-With assistance from James Hirai, Michael Msika, and Tasya Sibahutar.

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