MARKET WRAPS
Stocks:
European stocks mostly fell on Monday as Hamas' attack on Israel fuelled fears of a broader conflict, although losses were largely contained.
It was a very mixed picture for stocks, with energy issues trading higher, along with defense majors. However, airlines fell sharply.
"The share price of the airline sector might suffer from the war-led surging fuel prices," AlphaValue said.
U.S. Markets:
Stock-index futures fell close to 1% at the start of a week that will include September inflation data and the first of the third-quarter earnings, with results due from JPMorgan Chase and Delta Air Lines, among others.
On Monday, the U.S. bond market was closed for the Columbus day holiday.
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Forex:
The dollar strengthened along with other traditional safe-haven currencies like the yen as investors sought safety following the Hamas attack on Israel, though the impact on foreign-exchange markets "has been relatively modest so far," MUFG said.
Morgan Stanley said recent price action in U.S. rates and rising political uncertainty have bolstered skepticism about the dollar's status as a dominant reserve currency, but it doesn't share most of these concerns.
"We think investors are overly concerned that the USD will lose its dominant-currency crown. We generally take a more skeptical view of USD losing its 'dominant currency' crown, though some of the critiques are not unfounded."
Morgan Stanley said it maintains a long position view on the dollar for now.
Read Meaningful FX Market Impact Needs Middle East Tensions to Escalate
Bonds:
Eurozone government bond yields fell sharply as investors flocked into safe havens.
"The coming days are unlikely to bring any lasting relief unless geopolitical concerns broaden to an extent where the risk-off momentum adds fuel to the tightening of financing conditions, outweighing inflation risks from higher oil prices, so that the macro implications cannot be ignored by banks," Commerzbank Research said.
The performance of eurozone government bonds was spoiled in September, as the third quarter ended with a plunge in bond prices, bringing the year-to-date performance to negative, LBBW said.
"For much of the year, the cumulative YTD performance of the euro sovereign bond market had nurtured hopes that the historic price plunge of the previous year would be followed by a partial 'redemption'," it said.
September delivered an "ice-cold shower" in this respect.
The headwind from the U.S. government bond market has intensified to such an extent that the prices of the euro government securities have abruptly moved from the previous multimonth sideways movement into a steep fall, LBBW said.
Energy:
Oil prices rose sharply with uncertainty over the situation in the Middle East mounting.
"If western countries officially link Iranian intelligence to the Hamas attack, then Iran's oil supply and exports face imminent downside risks, " Commonwealth Bank of Australia said.
Iranian oil exports have surged this year with the U.S. overlooking sanctions to ease tensions, CBA added. However, if Iran is linked to the attack, it could provoke a tougher stance from the U.S.
"An immediate reduction in Iran's oil exports risks pushing Brent futures above $100 a barrel in the short term."
Read Brent Oil Futures Could Surge Above $100/Bbl in Short Term
Metals:
Metals prices edged higher as investors geared up for London Metals Week, while gold jumped, reflecting its role as a safe-haven asset.
Federal Reserve policy, China demand and the green transition are likely to be top of mind at London Metals Week, ING said.
"The uncertainty in the metals markets is far from over," it added.
DOW JONES NEWSPLUS
EMEA HEADLINES
Schaeffler Launches $3.85 Bln Bid to Combine With Vitesco Technologies
Schaeffler is making an offer to buy all Vitesco Technologies Group's shares in a bid that values the target at 3.64 billion euros ($3.85 billion) and seeks a combination of two of Germany's largest auto suppliers.
Schaeffler said Monday that its offer is intended as a first of three steps toward a merger of the two companies, which are both controlled by IHO Holding. The move would result in the creation of a group with combined annual sales of EUR25 billion, Schaeffler said.
Metro Bank Secures $1.13 Bln Funding to Shore Up Balance Sheet
Metro Bank said it has secured 925 million pounds ($1.13 billion) in funding to fix its balance-sheet issues, adding that investors and bondholders will face a cut on their investments while Jaime Gilinski Bacal is set to become controlling shareholder.
The U.K. lender said Sunday that the package agreed with investors consists of a GBP325 million capital raise, split between GBP150 million of new shares from its largest shareholders and GBP175 million new debt from bondholders, and GBP600 million of debt refinancing.
German Industrial Production Declined in August, Lagging Expectations
Germany's industrial production fell a little more than expected in August, yet more negative news for the key manufacturing base of Europe's largest economy.
Output declined 0.2% compared with the previous month, seasonally and on a calendar-adjusted basis, a level less severe than the 0.6% dip in July, but still missing economists' forecasts of a 0.1% fall, according to data set out Monday by German statistics office Destatis.
OPEC Says Oil Demand Will Stay Strong Through Middle of Century
OPEC said trillions of dollars are needed to find and develop fossil fuels over the next twenty years to support rising demand.
In its annual report on long-term energy trends, the Organization of the Petroleum Exporting Countries said the oil industry would need to invest some $14 trillion by 2045-roughly $2 trillion more than the group's 2022 forecast-to provide energy security amid strong economic and population growth in the years ahead.
Rio Tinto Backs Pilbara Iron Ore Cost, Shipment Guidance
Rio Tinto said it backed its full-year guidance to cost and shipments for its Pilbara iron ore operations.
The Anglo-Australian metals and mining giant said Monday that the iron ore operations in Pilbara, Western Australia, has produced 83.5 million metric tons in the third quarter, and that shipments from the network totalled 83.9 million.
GSK Partners With Zhifei to Boost Shingles Vaccine Availability in China
GSK said it has an exclusive agreement with Chongqing Zhifei Biological Products to co-promote its shingles vaccine Shingrix in China.
The British pharmaceutical giant on Monday said that Zhifei will have exclusive rights to import and distribute Shingrix in the country for an initial three-year period starting from Jan. 1.
Iran Helped Plot Attack on Israel Over Several Weeks
DUBAI-Iranian security officials helped plan Hamas's Saturday surprise attack on Israel and gave the green light for the assault at a meeting in Beirut last Monday, according to senior members of Hamas and Hezbollah, another Iran-backed militant group.
Officers of Iran's Islamic Revolutionary Guard Corps had worked with Hamas since August to devise the air, land and sea incursions-the most significant breach of Israel's borders since the 1973 Yom Kippur War-those people said.
GLOBAL NEWS
'Fear trade': What Israel-Hamas war means for oil prices and financial markets
Oil traders on Sunday said crude prices were likely to remain supported in the near term, as investors assessed the fallout from the surprise attack by Hamas on Israel and focused on the role played by Iran and the potential impact on that country's petroleum exports.
The conflict may also hold market-moving consequences for talks aimed at normalizing relations between Saudi Arabia and Israel.
Bank of Israel to sell up to $30 billion in foreign exchange as shekel tumbles
Israel's central bank said it will sell up to $30 billion in foreign exchange to support the shekel, which has tumbled in the wake of Hamas's surprise attack on the country.
"The Bank will operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets, " the Bank of Israel said in a statement on its website on Monday.
Investors Hope Earnings Season Will Revive Stocks
Investors worried about the recent pullback in stocks are counting on the coming earnings season to give them something to get excited about.
For much of 2023, U.S. stocks roared higher despite lackluster corporate profits. But an accelerating selloff in bonds has pushed longer-term yields near their highest levels in more than a decade, denting enthusiasm for stocks. A growing expectation that the Federal Reserve will keep interest rates higher for longer is adding fuel to investors' anxieties.
An Inverted Yield Curve Is Chilling. Imagine an Un-Inversion.
One of Wall Street's favorite recession predictors-an inverted yield curve-is getting less inverted, but that isn't all good news for investors. How the curve un-inverts matters, too.
Since July 2022, the chart plotting interest rates on U.S. Treasuries of different maturities has been downward sloping-with yields on shorter-term bills and notes exceeding those on longer-term securities-known as an inversion of the yield curve.
After Hamas Attacks Israel, Biden's Top Foreign-Policy Goals Hit Turbulence
WASHINGTON-Setbacks to President Biden's efforts to bring stability to the Middle East and fund the war in Ukraine have undermined top foreign-policy goals for his first term, adding to difficulties the U.S. faces with a third priority-China.
(MORE TO FOLLOW) Dow Jones Newswires
10-09-23 0521ET
