Stocks Pause as Mideast Tension Damps Bullish Mood: Markets Wrap

Stocks Pause as Mideast Tension Damps Bullish Mood: Markets Wrap·Bloomberg
Chiranjivi Chakraborty and Robert Brand
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(Bloomberg) -- Stocks paused on Monday as rising tension in the Middle East tempered the bullish sentiment sparked by the prospect of imminent Federal Reserve interest rate cuts.

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The Stoxx Europe 600 index was little changed at the open, with liquidity lower than usual as UK markets are closed for a holiday. US equity futures were steady after the S&P 500 and Nasdaq 100 both notched gains of more than 1% on Friday.

A gauge of the dollar was flat after it slumped the most in nine months on Friday. The yen gained for a second day as Asian-domiciled funds added to existing short positions on the greenback. Treasury yields ticked lower, with the two-year tenor down about three basis points.

Positioning for lower US borrowing costs is rippling through financial markets after Fed Chair Jerome Powell signaled on Friday that the “time has come” to pivot to monetary easing. But fears of escalating conflict in the Middle East prompted some haven buying Monday after an Israeli strike on Hezbollah targets in southern Lebanon. Crude oil advanced 0.7%.

Powell’s keenly awaited Jackson Hole speech constitutes a turning point in the Fed’s two-year battle to slow inflation, and means officials are likely to cut the benchmark interest rate from its highest in more than two decades. While the world’s largest economy is showing signs of cooling — warranting a pivot — there’s no sign yet of an outright contraction.

Elsewhere, the People’s Bank of China left the rate on its one-year policy loans, or the medium-term lending facility, at 2.3%, after a slashing the rate by 20 basis points in July. The decision underscores Beijing’s cautious approach in supporting the economy, even as China reported a rare contraction in bank loans amid weak demand. The PBOC has been walking a fine line of stimulating growth and cooling a government-bond buying spree to limit financial risks in recent months.

In commodities, iron ore extended a rebound with China’s huge inventories of the material continuing to draw down, in a tentative sign that a period of severe oversupply is starting to ease. Gold steadied near a record high.

Key events this week:

  • US durable goods, Monday

  • China industrial profits, Tuesday

  • Germany GDP, Tuesday

  • Hong Kong trade, Tuesday

  • Australia CPI, Wednesday,

  • Nvidia Corp. earnings, Wednesday

  • US GDP, Initial Jobless Claims Thursday

  • US personal income, spending, PCE price data, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 was little changed as of 8:09 a.m. London time

  • S&P 500 futures were little changed

  • Nasdaq 100 futures were little changed

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific Index rose 0.5%

  • The MSCI Emerging Markets Index rose 0.6%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.1182

  • The Japanese yen rose 0.5% to 143.68 per dollar

  • The offshore yuan was little changed at 7.1183 per dollar

  • The British pound fell 0.1% to $1.3199

Cryptocurrencies

  • Bitcoin fell 1% to $63,606.51

  • Ether fell 1.4% to $2,731.76

Bonds

  • The yield on 10-year Treasuries declined two basis points to 3.78%

  • Germany’s 10-year yield was little changed at 2.23%

  • Britain’s 10-year yield declined five basis points to 3.91%

Commodities

  • Brent crude rose 1% to $79.80 a barrel

  • Spot gold rose 0.1% to $2,516.20 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Georgina McKay.

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