US Futures Drop in Nervy Wait for Israel Response: Markets Wrap

(Bloomberg) — US futures fell while Treasuries unwound some of the previous day’s gains as flaring tensions in the Middle East put markets in a wait-and-see mode.

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With traders awaiting Israel’s response to a missile barrage from Iran, and Brent crude topping $75 a barrel, geopolitical fears have replaced optimism around central bank policy easing as the main market driver. The escalation in the region spurred a flight to safety on Tuesday and sent Wall Street’s fear gauge — the VIX — to a key level that usually indicates more market swings are in store.

Futures on the S&P 500 slipped 0.2% and Europe’s stocks benchmark erased earlier gains. Yields on 10-year Treasuries rose three basis points to 3.76% compared with a low of 3.69% on Tuesday when demand for havens fueled appetite for government bonds. The dollar was flat.

“Clearly there is a lot of uncertainty,” Anna Rosenberg, head of geopolitics at Amundi Asset Management, told Bloomberg TV. “Nevertheless I think the market is still very much operating in the base-case expectation that it remains more or less contained and doesn’t spiral out in an all-out war. And I think right now, that is the right thing to do.”

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In company news, JD Sports Fashion Plc fell after reporting results and after Nike Inc. reported a drop in quarterly sales after the US market close.

Oil producers bucked the declines for the main European index as oil soared after Israel vowed to retaliate for Tehran’s ballistic missile attack. The severe escalation of hostilities has spurred fears of a Middle East-wide war.

Meanwhile, Chinese stocks listed in Hong Kong jumped the most in almost two years after Beijing followed other major cities in relaxing home purchase rules. The massive stimulus efforts announced by China’s leaders last week turbocharged local assets and helped lift markets overseas.

Key events this week:

• S&P Global Manufacturing PMI on Wednesday

• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday

• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 6:48 a.m. New York time

• Nasdaq 100 futures fell 0.1%

• Futures on the Dow Jones Industrial Average fell 0.3%

• The Stoxx Europe 600 was little changed

• The MSCI World Index fell 0.1%

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Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was unchanged at $1.1068

• The British pound was little changed at $1.3279

• The Japanese yen fell 0.8% to 144.69 per dollar

Cryptocurrencies

• Bitcoin rose 1% to $61,420.9

• Ether rose 0.4% to $2,461.73

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.76%

• Germany’s 10-year yield advanced six basis points to 2.09%

• Britain’s 10-year yield advanced eight basis points to 4.02%

Commodities

• West Texas Intermediate crude rose 3.3% to $72.13 a barrel

• Spot gold fell 0.5% to $2,651 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rob Verdonck and Winnie Hsu.

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