Stock and Bond Futures Advance as Oil Declines: Markets Wrap
(Bloomberg) — Stock and bond futures advanced as oil retreated, with traders looking past the latest attacks on Saudi Arabia that threatened to widen the war in the Middle East.
Futures for the S&P 500 Index rose 0.3%, while those for Europe gained 0.6%. Asian equities lagged, with MSCI’s regional stocks gauge dropping 0.2% as South Korean shares slid 3% when trading resumed after a long weekend.
Brent crude dropped 1.2% to $103.43 a barrel after climbing to as high as $105.63 in early trade following weekend strikes by Yemen’s Houthis on Riyadh’s main airport. Traders weighed resilient Middle East flows against rising regional tensions and a US claim that Russia and Ukraine had agreed to a so-called energy ceasefire.
Treasury futures edged higher alongside government bonds in Australia and New Zealand. There’s no trading of cash Treasuries globally on Monday due to a US holiday. Elsewhere, India’s rupee strengthened 1% after the central bank on Saturday unveiled some of its strongest measures to support the currency since the 2013 taper tantrum.
Geopolitical risks have returned to the fore after the Houthi attacks raised the prospect of a broader conflict and further disruption to energy supplies. With little sign of a near-term resolution to the crisis in the Strait of Hormuz, oil may remain a source of inflationary pressure ahead of price data in the US and Europe this week.
“Our base case right now is that near-term energy prices remain elevated,” Yiping Liao, a portfolio manager at Templeton Global Investments, said on Bloomberg Television. “We don’t see a near-term resolution to the Hormuz crisis, certainly not before the US midterms.”
Earlier, Trump said the “energy ceasefire” was effective immediately, without providing details. Trump had previously announced a similar ceasefire last month, though Ukrainian President Volodymyr Zelenskyy later said no deal had been finalized and the war continued.
In other corners of the market, gold rose for a third day to trade near $4,200 an ounce.
A Bloomberg gauge of the dollar edged lower, snapping a three-day gain.
Elsewhere, talks between China and the EU ended late Friday with a 16-point consensus spanning trade and investment, export controls and intellectual property rights. The EU said China agreed to slash millions of hybrid car exports, with people familiar with the discussions saying the bloc intends to use safeguard measures to curb the imports.
Later in the week, investors will look to US consumer-price data and a scheduled appearance by Federal Reserve Chair Kevin Warsh for clues on the pace of further rate increases.
A stronger-than-expected September inflation reading may rekindle the recent bond selloff by putting pressure on the Fed to tighten policy more aggressively. The 10-year Treasury yield approached 5.4% last week, its highest since 2002.
Investors are mulling how high bond yields are starting to do some of the heavy lifting for central banks around the world by pushing up borrowing costs.
“For now, rising interest rates are not seen as overwhelming the growth and earnings story,” said Rebecca Patterson, senior fellow at the Council on Foreign Relations and former Bridgewater Associates LP chief investment strategist. “We can have equities and bond yields rise together. But if interest rates continue to rise, in part as central banks tighten, the risks grow that rates start to dominate and weigh on equity sentiment.”
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 1:41 p.m. Tokyo time Nikkei 225 futures (OSE) fell 0.2% Australia’s S&P/ASX 200 rose 0.7% Hong Kong’s Hang Seng rose 0.2% The Shanghai Composite fell 0.1% Euro Stoxx 50 futures rose 0.6% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1209 The Japanese yen was little changed at 158.30 per dollar The offshore yuan was little changed at 6.6930 per dollar Cryptocurrencies
Bitcoin rose 0.3% to $83,833.68 Ether rose 0.8% to $2,557.01 Bonds
The yield on 10-year Treasuries was little changed at 5.24% Japan’s 10-year yield declined seven basis points to 3.010% Australia’s 10-year yield declined one basis point to 5.32% Commodities
West Texas Intermediate crude fell 1.6% to $90.36 a barrel Spot gold rose 0.1% to $4,198.60 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Abhishek Vishnoi and Ruth Carson.
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