European equities carried over a weak Asian session as rising Treasury yields and escalating tensions in the Middle East soured investor appetite for risk assets.
(Bloomberg) — European equities carried over a weak Asian session as rising Treasury yields and escalating tensions in the Middle East soured investor appetite for risk assets.
The Euro Stoxx 50 futures slid 0.6%, after yields on 10-year US government bonds gained for a fourth day in Asia to continue the march toward 5%. Federal Reserve Bank of New York President John Williams said interest rates will have to stay at restrictive levels “for some time” to bring inflation back to the central bank’s target.
Stock benchmarks from Tokyo to Hong Kong, Sydney and mainland China fell over 1%. Oil slipped after an earlier rally with the US suspending some sanctions on Venezuelan output. Gold was steady on safe-haven demand after delivering gains of almost 7% since the Oct. 7 attack by Hamas on Israel.
Oil’s rally Wednesday came as Iran intensified its rhetoric against Israel after an explosion at a Gaza hospital that complicated diplomatic efforts to rein in the Middle East conflict. United Airlines Holdings Inc. tumbled almost 10% after warning the Israel-Hamas war and higher jet fuel costs would weigh on earnings. UK Prime Minister Rishi Sunak is set to visit Israel on Thursday.
“There is portfolio de-risking, probably raising cash in anticipation of escalating geopolitical risks in the Middle East from Israel’s potential ground invasion of the Gaza strip and potential violent retaliation against Israel,” said Alan Richardson, portfolio manager at Samsung Asset Management.
The dollar rose against most of its Group-of-10 peers. The Aussie was the worst performer among them following soft jobs data. In emerging markets, the Malaysian ringgit fell to a 25-year low.
Elsewhere, the yen slightly strengthened as Japan’s exports rose more than expected in September. Traders are preparing for turbulent trading in the currency amid growing concerns that Japanese authorities will intervene. A former Bank of Japan board member said the central bank may scrap negative interest rates by the end of this year.
US stock futures fell in Asia as well, after the S&P 500 slumped 1.3% on Wednesday.
Treasury yields remain at multi-decade highs with Fed Governor Christopher Waller noting policymakers can wait and gather more data before deciding if the economy needs further monetary restraint.
Still, elevated yields are attracting buyers, with a 20-year auction seeing its yield lower than indicated pre-auction trading, helping cap a rise in long-dated yields. Fed Chair Jerome Powell is set to speak at the Economic Club of New York on Thursday.
Key events this week:
- US initial jobless claims, existing home sales, leading index, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 2:23 p.m. Tokyo time. The S&P 500 fell 1.3%
- Nasdaq 100 futures were down 0.1%. The Nasdaq 100 fell 1.4%
- S&P/ASX 200 futures fell 1.6%
- Japan’s Topix fell 1.3%
- Hong Kong’s Hang Seng fell 1.9%
- The Shanghai Composite fell 1.1%
- Euro Stoxx 50 futures fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0533
- The Japanese yen was little changed at 149.81 per dollar
- The offshore yuan was little changed at 7.3283 per dollar
Cryptocurrencies
- Bitcoin rose 0.3% to $28,335.65
- Ether fell 0.6% to $1,553.29
Bonds
- The yield on 10-year Treasuries advanced five basis points to 4.96%
- Australia’s 10-year yield advanced 13 basis points to 4.78%
Commodities
- West Texas Intermediate crude fell 0.1% to $88.20 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Ishika Mookerjee.
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