MARKET WRAPS
Watch For:
Employment Trends Index for September; Canada financial markets closed for Thanksgiving holiday; Fed speak from Lorie Logan and Philip Jefferson
Today's Top Headlines/Must Reads:
- Oil Prices Surge After Attack on Israel. What Comes Next.
- 'Fear trade': What Israel-Hamas war means for oil prices and financial markets
- It's Bank Earnings Season. Why Wall Street Is Nervous.
Follow WSJ market coverage here
Opening Call:
Stock futures fell on Monday as investor sentiment was hit by an upsurge of violence in the Middle East.
Benchmark oil and gas prices jumped, driven by concerns that the conflict could spill over into the broader Middle East region.
"'The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in," Hargreaves Lansdown said.
Bourses in much of Europe and Asia sold off, while traders moved into the perceived havens of gold the dollar and government bonds, such as the German bund.
The Treasury market is closed on Monday for Columbus Day and Indigenous Peoples day, but futures were trading and these indicated falling benchmark yields.
"Geopolitical risk doesn't tend to linger long in markets but there are many second order impacts that could come through in the weeks, months and years ahead from this weekends' developments," Deutsche Bank said.
Later this week, traders may find their focus switching back to monetary policy.
Producer and consumer prices data for September will be published on Wednesday and Thursday, respectively, with further evidence of easing price pressure required in order to cement no more rate hikes by the Federal Reserve this year.
Read Higher US Rates Likely on Rising Oil Prices, Strong Jobs Growth
Premarket Movers
Disney fell 0.4%. WSJ reported that Nelson Peltz's Trian Fund Management was pushing for multiple seats on the board of the entertainment giant.
Read Nelson Peltz Boosts Disney Stake, Seeks Board Seats
Exxon Mobil and Chevron gained 2%, and U.S.-listed shares of Shell were up 1% after the jump in oil prices.
Mirati Therapeutics fell 1.7% after it reached an agreement to be acquired by Bristol Myers Squibb for $58 a share in cash. Bristol Myers fell 0.4%.
Read Bristol Myers Squibb to Acquire Mirati Therapeutics
RTX and Lockheed Martin rose more than 5% in premarket trading as investors reacted to the Israel-Hamas war. Energy stocks such as Occidental Petroleum also surged.
Forex:
The dollar gained in early European trading as capital flowed into the safety of the currency following Hamas's attack on Israel.
"The escalation of the tension sent a panic into the financial markets on Monday open," Swissquote Bank said. However, it is difficult to predict the extent of the price action on geopolitical shocks, it added.
Morgan Stanley said it maintains a long position view on the dollar for now.
Recent price action in rates and rising political uncertainty have bolstered skepticism about the dollar's status as a dominant reserve currency, it said, but it doesn't share most of these concerns.
"We generally take a more skeptical view of USD losing its 'dominant currency' crown, though some of the critiques are not unfounded."
Read Dollar, Yen Rise as Attack on Israel Lifts Safe Havens, but Impact Is Limited
Energy:
Oil prices rose sharply in European trading, 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, the bank said. 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 Iran Oil Production Could Fall Following Israel Attacks, Pushing Brent Higher
Read Saudi-Israel Normalization Could Stumble After Hamas Attack, Boosting Oil
Metals:
Base metals prices were higher in early London trading as market participants geared up for London Metals Week, while gold rose reflecting its role as a safe-haven assets.
Market participants are gearing up for the start of London Metals Week, the annual bash where the industry descends on the U.K.'s capital.
Federal Reserve policy, China demand and the green transition are likely to be top of mind, ING said.
"The uncertainty in the metals markets is far from over," it added.
TODAY'S TOP HEADLINES
Citigroup to Sell China Consumer Wealth Portfolio to HSBC-2nd Update
Citigroup will sell its onshore consumer wealth portfolio in China to HSBC Holdings as the U.S. bank continues to leave consumer banking across parts of Asia.
It will sell its China consumer wealth portfolio, including clients, assets under management and deposits, worth approximately $3.6 billion, to HSBC Bank China.
Higher Rates Have Bank Stocks on the Mat
Rising interest rates helped spark a regional-banking crisis earlier this year. The turmoil has eased, but bank stocks are still in the doldrums.
The KBW Nasdaq Bank Index has fallen 6.6% since mid-March when the regulators took control of Silicon Valley Bank. KeyCorp is down 9.6%, while Comerica and Truist Financial have shed 5.1% and 15%, respectively. The S&P 500 has gained 12% over the same period.
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.
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.
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.
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.
In the span of a week, the assault by Iran-backed militant group Hamas on Israel has complicated Washington's efforts to broker a major pact to normalize relations between Israel and Saudi Arabia, while a showdown over government assistance to Ukraine-and the removal of the Republican House speaker-have stalled support for Kyiv's fight against Russia. At the same time, the Biden administration faces a test in whether the U.S. president and Chinese leader Xi Jinping will meet next month, around the time the U.S. hosts a meeting of Asia-Pacific leaders in San Francisco.
Congressional Showdown: Can Lawmakers Boost Ukraine Aid by $50 Billion-or Even More?
WASHINGTON-Pro-Ukraine senators from both parties, unnerved by the upheaval in the House, say they want to move quickly to pass a yearlong aid package for the war-torn country that far exceeds the amount of aid requested by President Biden in August and would last through the 2024 election.
Biden requested $24 billion in additional aid in August, drawing opposition from many Republicans who have grown wary of further funding for the war. Now, supporters of Ukraine in the Senate are aiming to offer a much bigger and longer-term package-with a price tag between $50 billion and $100 billion.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Nothing major scheduled
Economic Calendar (ET):
Thanksgiving. Financial markets closed
Expected Major Events for Monday
06:00/GER: Aug Industrial Production Index
14:00/US: Sep Employment Trends Index
23:01/UK: Sep BRC-KPMG Retail Sales Monitor
23:50/JPN: Sep International Transactions in Securities
23:50/JPN: Aug Balance of Payments
23:50/JPN: 2Q Revised Balance of Payments
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
Alphatec Holdings Inc (ATEC) is expected to report for 3Q.
Applied Digital Corp (APLD) is expected to report for 1Q.
BioVie Inc (BIVI) is expected to report for 4Q.
EVI Industries Inc (EVI) is expected to report for 4Q.
Saratoga Investment Corp (SAR) is expected to report $1.08 for 2Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
AES Corp Cut to Neutral From Buy by UBS
Apellis Pharmaceuticals Raised to Overweight From Neutral by JP Morgan
AutoZone Cut to Perform From Outperform by Oppenheimer
CalAmp Cut to Hold From Buy by Craig-Hallum
Cambridge Bancorp Raised to Outperform From Market Perform by Keefe, Bruyette & Woods
(MORE TO FOLLOW) Dow Jones Newswires
10-09-23 0605ET
