(Bloomberg) — US futures dropped while Treasuries gave back some of the gains made the previous day as rising tensions in the Middle East left markets in a cautious stance.
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As traders await Israel’s response to a missile attack from Iran, and Brent crude prices climbed above $75 a barrel, concerns over geopolitics have taken precedence over hopes for central bank policy easing as the primary market influence. The intensifying situation in the region prompted a rush to safer assets on Tuesday, pushing Wall Street’s volatility index — the VIX — to a pivotal level typically associated with increased market fluctuations.
S&P 500 futures fell 0.2%, and Europe’s stock benchmark wiped out earlier gains. Yields on 10-year Treasuries rose by three basis points to 3.76%, rebounding from a low of 3.69% on Tuesday when demand for safe-haven investments boosted the appeal of government bonds. The dollar remained steady.
“There’s clearly a lot of uncertainty,” Anna Rosenberg, head of geopolitics at Amundi Asset Management, shared with Bloomberg TV. “However, I believe the market is still largely functioning under the base-case expectation that things remain contained and do not escalate into full-scale war. And I think this is the correct approach at this moment.”
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In corporate news, JD Sports Fashion Plc saw its shares decline following results, and Nike Inc. reported a drop in quarterly sales after the US market closed.
Oil companies stood out in contrast to the declines affecting the main European index, as oil prices surged after Israel promised retaliation for Iran’s ballistic missile assault. The sharp increase in hostilities has heightened fears of a potential widespread conflict in the Middle East.
Meanwhile, Chinese stocks listed in Hong Kong experienced their largest jump in nearly two years after Beijing relaxed home purchase regulations in line with other major cities. The extensive stimulus measures introduced by China’s leaders last week revitalized local assets and provided a boost to overseas markets.
Key events this week:
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S&P Global Manufacturing PMI on Wednesday
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Fed officials speaking include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem, and Fed Governor Michelle Bowman on Wednesday
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US nonfarm payrolls report on Friday
Here are some of the significant market movements:
Stocks
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S&P 500 futures dropped 0.2% as of 6:48 a.m. New York time
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Nasdaq 100 futures decreased by 0.1%
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Dow Jones Industrial Average futures fell 0.3%
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The Stoxx Europe 600 remained largely unchanged
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The MSCI World Index declined by 0.1%
Currencies
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The Bloomberg Dollar Spot Index remained relatively unchanged
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The euro held steady at $1.1068
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The British pound was stable at $1.3279
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The Japanese yen fell by 0.8% to 144.69 per dollar
Cryptocurrencies
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Bitcoin increased by 1% to $61,420.9
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Ether rose 0.4% to $2,461.73
Bonds
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The yield on 10-year Treasuries increased by three basis points to 3.76%
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Germany’s 10-year yield climbed by six basis points to 2.09%
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The UK’s 10-year yield rose by eight basis points to 4.02%
Commodities
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West Texas Intermediate crude increased by 3.3% to $72.13 a barrel
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Spot gold decreased by 0.5% to $2,651 an ounce
This story was produced with assistance from Bloomberg Automation.
–With help from Rob Verdonck and Winnie Hsu.
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