MARKET WRAPS
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EU foreign trade; Germany WPI; Italy CPI; trading updates from Galp Energia, X5 Retail
Opening Call:
Stock futures were mixed, with focus on developments in the Middle East. In Asia, stock benchmarks fell; the dollar and Treasury yields steadied; while oil futures held on to gains and gold dropped.
Equities:
European stock futures were mixed early Monday, as Israel prepared for a Gaza invasion and diplomats pushed to find a solution to the crisis. Asian stocks fell and U.S. equity futures rose.
The Israeli army said it is preparing for "significant ground operations" in Gaza, Commerzbank said. Global markets will brace for the fallout from this conflict, the bank added.
Risks of escalation in the Middle East conflict have soured sentiment, said Saxo Markets.
Forex:
The dollar firmed in Asia. Any significant negative news from the conflict in the Middle East could further support USD and oil prices, CBA said.
Also, Fed Chair Powell is due to give a speech this week, CBA noted, adding a reiteration of the "higher for longer" message on rates could allow U.S. bond yields to remain at or above their current levels and keep USD supported.
Bonds:
Treasury yields steadied after dropping last Friday, as traders flocked to bonds amid concerns about an escalating conflict between Israel and Hamas.
"As the death toll rises and a full-scale war breaks out between Israel and Hamas, geopolitical uncertainty has once again been thrust into the limelight," said Raymond James Chief Investment Officer Larry Adam.
"The surprise attack comes at a critical juncture for the global markets, a time when central banks are preparing to wind down their tightening cycles as the threat of inflation eases. And while unexpected Middle East tensions have the potential to drive oil prices higher, we are hopeful that the conflict will remain contained. In fact, the market's initial reaction to the tragic events has been relatively muted."
Energy:
Oil futures rose slightly in Asia after prices surged nearly 6% on Friday. Focus has now shifted to the possible Israeli ground invasion of the Gaza Strip, CBA said.
The scenario with lowest risk premium for oil prices, where Brent futures may potentially remain in $90s/bbl, is where Israel seeks to swiftly dismantle Hamas and withdraw as soon as possible and Iran-backed militant groups limit their military engagement, CBA added.
Metals:
Gold futures fell early Monday after prices settled at their highest in three weeks on Friday.
Gold prices may undergo a minor pullback toward support closer around $1,920/oz, based on the one-hour technical chart, said Matt Simpson, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!E24TWW5HCLqJHAlwEcH2Q9fN3tsQxXszw93CbfDyuuFmMmhf9kKGXNPcwn_xh_Q4Ws61OTQicfxf9njpUJ1ZLmLq1ffLKwATic-Usuz345U$ . This level could offer market participants a better entry point with improved reward-to-risk potential, Simpson added.
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Copper prices rose as China's robust September commodity imports data boosted investor confidence. The prospects of additional stimulus measures in China have encouraged mills to restock, ANZ said.
However, copper prices remain under pressure as stockpiles at the London Metal Exchange have reached their highest in nearly two years, ANZ said. Meanwhile, the Fed's monetary policies, which will likely remain tight in the foreseeable future after stronger-than-expected September inflation data, could weigh on metals prices, ANZ added.
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Iron-ore prices advanced as Chinese demand remained resilient. Baocheng Futures said that even though recent daily hot metal production and imported iron-ore daily consumption by steel plants that it watches continue to fall, demand remains relatively high compared with other times of the year.
TODAY'S TOP HEADLINES
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Violence Surges in the West Bank Following Gaza Attack on Israelis
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Clashes Intensify as Israel Prepares Gaza Invasion
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Foreign diplomats meanwhile scrambled to find a solution to a crisis that threatens to engulf the Middle East.
British Billionaire Jim Ratcliffe Nears Deal to Buy Minority Stake in Manchester United
British billionaire Jim Ratcliffe is in talks to acquire a minority stake of Manchester United in a deal that would value the globally renowned soccer club at more than $3.3 billion, according to people familiar with the matter.
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Trader's Case Tests DOJ's Policing of Global Currency Market
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U.S. Presses Arab Leaders to Help Prevent Escalation From Potential Gaza Invasion
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10-16-23 0020ET
