(Bloomberg) — European stocks declined along with US equity futures as the risk of escalating conflict in the Middle East damped risk appetite. Crude oil extended gains.
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The Stoxx Europe 600 index fell about 0.8%, with all industry sectors in the red. Contracts on the S&P 500 and Nasdaq 100 suggested a lower open in Wall Street. Bloomberg’s dollar index gained for a fourth day, bolstered by a rise in Treasury yields.
Global equities are on course for their first weekly loss in four as the world awaits Israel’s response to a missile strike by Iran. Israel’s warplanes bombed Beirut overnight, after eight of its soldiers were killed in southern Lebanon in battles against Hezbollah. Amid the geopolitical uncertainty, investors are also looking for signals on the Federal Reserve’s next policy move and how effective it is going to be in shoring up the US economy.
“Although the conflict in the Middle East is a negative event, from the market perspective that will be secondary to how the growth trajectory and the easing policy of the Fed are impacting bond yields,” said Ashok Bhatia, co-chief investment officer for fixed income at Neuberger Berman.
Brent crude oil rose for a fifth day, climbing toward $75 a barrel. Investors are concerned that, should Israel strike key Iranian assets, the Islamic Republic will lash out and escalate their conflict, dragging in more countries and potentially disrupting global energy shipments.
“The question has been about how aggressive Israel’s response will be and whether energy infrastructure will be impacted,” said Jun Rong Yeap, a market strategist at IG Asia Pte.
In Europe, companies are facing additional headwinds. France’s CAC 40 stock benchmark underperformed, falling about 1%, after French President Emmanuel Macron endorsed a temporary tax on the country’s largest companies. German software maker SAP SE declined after US prosecutors broadened a probe of potential price-fixing. Stellantis NV shares were down 3% after the company slashed vehicle production in its key Italian market.
The pound weakened and UK stocks outperformed after the Guardian reported Bank of England Governor Andrew Bailey as saying the central bank could be a “bit more aggressive” with interest-rate cuts.
The strengthening dollar is adding to the pressure on the yen as stronger-than-expected ADP jobs data on Wednesday led traders to pare bets on aggressive Fed rate cuts. Swaps traders were penciling in some 33 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week.
Key events this week:
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.8% as of 9:23 a.m. London time
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S&P 500 futures fell 0.4%
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Nasdaq 100 futures fell 0.5%
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Futures on the Dow Jones Industrial Average fell 0.4%
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The MSCI Asia Pacific Index fell 0.5%
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The MSCI Emerging Markets Index fell 1.2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro was little changed at $1.1042
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The Japanese yen was little changed at 146.57 per dollar
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The offshore yuan was little changed at 7.0407 per dollar
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The British pound fell 1% to $1.3131
Cryptocurrencies
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Bitcoin fell 0.9% to $60,365.22
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Ether fell 2.2% to $2,332.91
Bonds
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The yield on 10-year Treasuries advanced two basis points to 3.80%
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Germany’s 10-year yield advanced four basis points to 2.13%
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Britain’s 10-year yield declined two basis points to 4.00%
Commodities
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Brent crude rose 1.2% to $74.77 a barrel
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Spot gold fell 0.6% to $2,643.45 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and John Cheng.
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