Oil, gold and bonds gain from Middle East conflict while stocks fall

SYDNEY/LONDON, Oct 9 (Reuters) – Conflict in the Middle East lifted oil, gold and safe-haven government bonds and hurt global stocks and Israeli assets on Monday. The September US jobs report released on Friday later raised the rate for inflation figures. week.

Israeli government bonds fell, with the 2120 ‘hundred-year’ bond at a record low of 5.3 cents on the dollar. The shekel fell to its lowest level since 2016 at 3.9880 per dollar as the country’s central bank offered to sell up to $30 billion of foreign currency to maintain stability.

That helped par the shekel’s losses to 3.924, while the central bank said it would provide liquidity to markets as needed.

Israel attacked the Palestinian enclave of Gaza on Sunday in retaliation for one of the bloodiest attacks in its history when the Islamist group Hamas killed 700 Israelis and kidnapped dozens more.

“Uncertainty about what that means for the region is that oil is rising and there’s a bit of ‘risk off’, so bond markets are acting up, equity markets are going down a little bit,” said Peter Schaffrick, chief executive of European Macro. Strategist at RBC Capital Markets.

For a broader or lasting impact, the conflict must escalate beyond Israel’s borders, he said.

“You can’t help but feel sympathy for the people on the ground, but the market, if it doesn’t affect the broader economy, things can easily be reduced.”

Brent crude traded as high as $4 a barrel at one point and last traded up $3, or 3.55%, at $87.61.

US S&P 500 futures fell 0.6% and Europe’s main STOXX 600 index lost 0.3%. (.STOXX)

The cautious mood is a salve for sovereign bonds after recent heavy selling and 10-year Treasury futures rose a substantial 13 ticks. The Treasury market is closed on Monday for Columbus Day.

Germany’s 10-year bund yield fell 6 basis points to 2.83%, retreating from last week’s 12-year high.

Gold demand also rose 1% to $1,850 an ounce.

Focus on the FED

The conflict in the Middle East comes at a time when markets are jittery and bond yields around the world are at multi-year highs.

The capitulation of asset managers who had long held government bonds, rising oil prices, a flood of government and corporate bond issuance and investors finally accepting that central banks will keep rates high for a long time drove the bond selloff.

Friday’s US jobs report only added more to the long-term rate scenario, and investors’ attention now turns to Thursday’s September consumer price data.

Average forecasts are for a 0.3% gain in both headline and core measures, which should see the annual pace of inflation touch down.

Minutes from the latest Federal Reserve meeting are also due this week, and will help gauge how serious members are about raising or hiking rates again.

Fed funds futures indicate an 86% chance the Fed will keep rates on hold in November, cutting about 75 basis points to 2024.

China returns from vacation this week with a deluge of data, including consumer and producer inflation, trade, credit and debt growth.

Check out the latest ructions in the country’s property market. Embattled developer Country Garden ( 2007.HK ) may soon announce a restructuring of its offshore debt, local media reported, and bondholders of beleaguered China Evergrande Group ( 3333.HK ) raised concerns that its debt plans could be in jeopardy.

News from the Middle East could sour the start of the US corporate earnings season, with 12 S&P 500 companies reporting this week, including JP Morgan, Citi and Wells Fargo.

In currency markets, the Japanese yen, Swiss franc and US dollar were safe havens, although oil currencies also found support.

The dollar index, which tracks the greenback against six other major currencies, rose 0.27% to 106.4, while the euro fell 0.65% to 157.0 yen against the Japanese currency. ,

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