(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.
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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.
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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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