Stocks Fall on Mideast Tensions, Treasuries Rise: Markets Wrap

(Bloomberg) — Markets remained jittery Friday after an escalation of tensions in the Middle East sent stocks tumbling around the world and fueled demand for safe-haven assets including bonds and the dollar.

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Gains in Treasuries sent the 10-year yield down as much as 14 basis points after Israel launched a retaliatory strike against Iran less than a week after Tehran fired rockets and drones , according to two American officials. They reduced the decline as Iranian media appeared to downplay the incident. Bond yields in Europe have also fallen.

The Stoxx Europe 600 index fell 0.7%, posting a third consecutive week of losses. S&P 500 and Nasdaq 100 futures were down 0.5% and 0.7%, respectively.

The dollar index held steady after erasing an earlier gain. Oil also slowed its first sharp jump. Brent crude traded up just over 1%, after climbing above $90 a barrel on fears of a broader conflict that could endanger supplies.

“The initial flight-to-safety response is starting to reverse as we learn more about the details of what happened overnight,” said Viraj Patel, global macro strategist at Vanda Research. “Even without escalation, the combination of mixed earnings and geopolitical headwinds this week was a catalyst for the unwinding of long positions in stocks.”

The latest moves cap a dismal week for markets after strong economic data and hawkish rhetoric from the Fed reinforced speculation that U.S. interest rates would stay high for longer. With earnings season in full swing, traders are now looking for results from companies that could support any rebound.

“Caution will dominate the coming days and bears will position themselves for further declines until next week’s economic data,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM.

Meanwhile, debate still rages over the trajectory of U.S. interest rates.

New York Fed President John Williams said that while it falls short of his baseline expectations, even a rate hike is possible if justified. His Atlanta counterpart, Raphael Bostic, said he didn’t think easing would be appropriate before the end of 2024. The Fed could keep rates steady all year, the Minneapolis Fed chief said , Neel Kashkari, at Fox News Channel.

Among individual stocks, Taiwan Semiconductor Manufacturing Co. fell after the company lowered its chip sector revenue growth outlook, citing a softer recovery in the smartphone and personal computer sectors. Infosys Ltd. collapsed in the United States after forecasting tepid sales growth for the year.

The story continues

Key events this week:

• BOE Deputy Governor Dave Ramsden and ECB Governing Council Member Joachim Nagel speak on Friday.

• Chicago Fed President Austan Goolsbee speaks Friday

Some of the main market movements:

Actions

• The Stoxx Europe 600 fell 0.7% at 8:52 a.m. London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 0.7%

• Dow Jones Industrial Average futures fell 0.4%

• The MSCI Asia-Pacific index fell 1.7%

• The MSCI Emerging Markets Index fell 1.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.0657

• The Japanese yen rose 0.1% to 154.43 per dollar

• The offshore yuan was little changed at 7.2510 per dollar.

• The British pound rose 0.1% to $1.2451.

Cryptocurrencies

• Bitcoin rose 1.5% to $64,489.01

• Ether rose 0.2% to $3,077.12

Obligations

• The 10-year Treasury yield fell four basis points to 4.59%

• The German 10-year yield fell two basis points to 2.47%

• The UK 10-year yield fell two basis points to 4.25%

Raw materials

• Brent crude rose 1.2% to $88.15 a barrel

• Spot gold rose 0.4% to $2,388.23 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from John Cheng, Divya Patil, Macarena Muñoz and Isolde MacDonogh.

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