US Treasuries and gold fell along with crude oil as investors dialed back hedges against an escalation of the conflict in the Middle East.
(Bloomberg) — US Treasuries and gold fell along with crude oil as investors dialed back hedges against an escalation of the conflict in the Middle East.
The yield on the US 10-year note rose five basis points to 4.97%. Israel held off on its ground offensive into Gaza as efforts to secure the release of more hostages continued. Oil slipped to $87 a barrel, while gold fell from a five-month high. Europe’s Stoxx 600 index and US futures were little changed.
Markets are unwinding last week’s flight to safety after Hamas released two US hostages and aid started to trickle through Egypt’s border with Gaza over the weekend. Still, the respite may prove fleeting with Israel stepping up air raids on Gaza in preparation for the “next phase” of its conflict with Hamas, while also warning that Hezbollah risks dragging Lebanon into a wider regional war.
It’s “a carbon copy of last Monday’s session as we see a partial unwind of the safe-haven flows put on ahead of the weekend,” said Tony Sycamore, an analyst at IG Australia in Sydney.
Beyond geopolitical concerns, global markets have been whipped in recent weeks by climbing Treasury yields and growing concern about interest rates staying elevated for longer. Federal Reserve Bank of Cleveland President Loretta Mester said the US central bank is close to wrapping up its tightening campaign if the economy evolves as expected.
This week, traders will be seeking clues on the outlook for global interest rates with inflation readings in Australia and Japan as well as economic activity data in the US and Europe. Fed Chairman Jerome Powell is due to give remarks and the European Central Bank will deliver a policy decision later in the week.
Asian stocks dropped from the open, following Friday’s losses on Wall Street. China shares led declines amid property sector woes, while confidence waned further after Beijing announced a series of investigations into Foxconn Technology Group, Apple Inc.’s most important partner.
The yen slipped to 150.11 at the start of Asia trade before rapidly paring the move. Bank of Japan officials are pondering whether to tweak their yield-curve control setting at a policy meeting next week, the Nikkei newspaper reported Sunday, without saying where it got the information.
“Markets are again on high alert for a possible BOJ intervention,” Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients. The yen is likely to remain under pressure this week “as the rise in the 10-year Japanese government bond yield, amid growing speculation of BOJ policy tightening, will do little to reduce Japan’s wide bond yield gap with the US,” they said.
Read more: Israel’s Support for Hostage Talks May Delay Invasion of Gaza
Key events this week:
- Taiwan jobless rate, industrial production, Monday
- Eurozone consumer confidence, Monday
- EU foreign ministers meet in Luxembourg, Monday
- Reserve Bank of Australia Governor Michele Bullock speaks in Sydney, Tuesday
- Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Tuesday
- UK S&P Global / CIPS Manufacturing PMI, jobless claims, unemployment, Tuesday
- US S&P Global Manufacturing PMI, Tuesday
- UN Security Council is expected to open debate on the Middle East, Tuesday
- Microsoft, Alphabet earnings, Tuesday
- Australia 3Q CPI, Wednesday
- Germany IFO business climate, Wednesday
- IBM, Meta earnings, Wednesday
- South Korea GDP, Thursday
- European Central Bank rate decision, Thursday
- EU leaders summit in Brussels, Thursday-Friday
- US wholesale inventories, GDP, US durable goods, initial jobless claims, Thursday
- Intel, Amazon earnings, Thursday
- Japan Tokyo CPI, Friday
- China industrial profits, Friday
- US personal spending and income, University of Michigan consumer sentiment, Friday
- Exxon Mobil earnings, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 8:20 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.7%
- The MSCI Emerging Markets Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0580
- The Japanese yen was little changed at 149.93 per dollar
- The offshore yuan was little changed at 7.3246 per dollar
- The British pound was little changed at $1.2158
Cryptocurrencies
- Bitcoin rose 2.8% to $30,702.16
- Ether rose 2.7% to $1,685.81
Bonds
- The yield on 10-year Treasuries advanced seven basis points to 4.98%
- Germany’s 10-year yield advanced four basis points to 2.93%
- Britain’s 10-year yield advanced four basis points to 4.69%
Commodities
- Brent crude fell 1% to $91.26 a barrel
- Spot gold fell 0.3% to $1,975.82 an ounce
This story was produced with the assistance of Bloomberg Automation.
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