Stock and Bond Futures Rise as Oil Extends Decline: Markets Wrap

(Bloomberg) — Stock and bond futures advanced as crude oil extended its decline, with traders looking past the latest attacks on Saudi Arabia that have threatened to widen the war in the Middle East.

Futures for the S&P 500 Index and Nasdaq 100 Index rose at least 0.3%. Equity benchmarks in Asia were mixed though, with South Korea’s Kospi sliding 1.7% as trading resumed after a long weekend. The broader MSCI Asia Pacific Index was down 0.1%.

Brent crude fell 1.7% to $102.99 a barrel after climbing to as high as $105.63 earlier following weekend strikes by Yemen’s Houthis on Riyadh’s main airport. Treasury futures reversed earlier losses and edged higher alongside government bonds in Australia and New Zealand. There will be no cash trading in Treasuries on Monday as markets in the US and Japan are shut for holidays.

Elsewhere, the rupee climbed in offshore trading after India’s central bank on Saturday announced some of its strongest measures to bolster the currency since the 2013 taper tantrum.

Geopolitical risks have returned to the fore as the attacks by the Houthis, who had largely stayed on the sidelines after the US-Israeli war against Iran began in February, have raised the threat of a broader conflict and more disruption to energy supplies. The renewed uncertainty comes ahead of inflation data in the US and Europe this week, with oil prices remaining a key factor in the outlook for interest rates.

With the US inflation reading due and the start of another earnings season, “there will be plenty for markets to digest,” Nick Twidale, chief market analyst at AT Global Markets in Sydney, wrote in a note to clients. “In quieter conditions, geopolitical headlines can often have an outsized impact,” he wrote.

In other corners of the market, gold rose for a third consecutive session to top $4,200 an ounce.

A Bloomberg gauge of the dollar was little changed after erasing an early Monday advance. The gauge rose for three sessions through Friday.

Traders also weighed President Donald Trump’s claim of an “energy ceasefire” between Russia and Ukraine. Trump, who said the truce was effective immediately, had made a similar claim last month, but Ukrainian President Volodymyr Zelenskyy said no deal had been finalized.

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 discussions saying the bloc intends to use safeguard measures to curb the imports.

Apart from the US consumer-price data, traders are also on watch for 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 the 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 10:57 a.m. Tokyo time Nikkei 225 futures (OSE) fell 0.3% Australia’s S&P/ASX 200 rose 0.8% Hong Kong’s Hang Seng rose 0.6% The Shanghai Composite was little changed Euro Stoxx 50 futures rose 0.6% Currencies

The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.1213 The Japanese yen rose 0.1% to 158.14 per dollar The offshore yuan was little changed at 6.6933 per dollar Cryptocurrencies

Bitcoin was little changed at $83,517.49 Ether was little changed at $2,537.69 Bonds

Australia’s 10-year yield was little changed at 5.34% Commodities

West Texas Intermediate crude fell 1.9% to $90.14 a barrel Spot gold rose 0.4% to $4,209.58 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Ruth Carson.

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