Hugh Jones
LONDON (Reuters) – Global stocks fell, oil prices rose and U.S. bond yields fell on Friday after reports of an Israeli attack on Iran, the latest reminder of how the Middle East powder keg is casting a growing shadow over markets.
Israel’s attack on Iranian soil was the latest exchange between the two sworn enemies, sending safe-haven currencies such as the yen and Swiss franc higher and putting gold on track for a fifth week of gains.
Oil prices jumped $3 a barrel on concerns that oil supplies to the Middle East could be disrupted, but later eased slightly after Iran said it had no plans to immediately retaliate, denying any attack had taken place. place.
U.S. Treasuries rose, pushing the benchmark yield lower to 4.5899%.
The MSCI All Country index was down 0.38% at 746.54, further off its high of 785.62 a month ago, although still up about 3% for the year.
In Europe, the STOXX 600 index of leading companies fell 0.7%.
Markets are facing a triple whammy of the US Federal Reserve’s reluctance to cut interest rates, disappointing semiconductor earnings such as Taiwan’s TSMC, and rising geopolitical risks.
Naka Matsuzawa, chief macroeconomist at Nomura in Tokyo, said developments in the Middle East were exacerbating the upward trend in global inflation expectations.
“It’s not just a Middle East problem that’s leading to risk reduction now. More fundamentally, it is the fading of expectations for rate cuts from the Fed, and against the background of this, higher inflation expectations, and this conflict… is fundamentally worse,” Matsuzawa said.
US stock index futures fell about 0.4%, with no major data expected before the opening bell.
Netflix (NASDAQ:) will be top of Wall Street’s radar after its shares fell after the close on Thursday when the company unexpectedly announced it would stop reporting subscriber numbers each quarter, seen as a sign that years of customer profits in the streaming wars are coming to an end.
Ross Yarrow, managing director of equities at RW Baird, said tensions in the Middle East could potentially tick off two of the biggest risks to inflation.
“The first one is the oil shock. We’ve seen this tape before, with prices over $100 a barrel and so on,” Yarrow said.
“The other issue is container shipping costs,” Yarrow said, adding that there was so far no sign of a rebound after a sharp rise earlier in the year due to tensions in the Red Sea.
Meanwhile, first-quarter earnings season is already in full swing, market expectations are quite low and a narrow group of stocks are under pressure, Yarrow added.
CHIPS DOWN
Equity markets were already heading lower even before the headlines in the Middle East emerged, as stronger U.S. economic data prompted more Fed officials to signal there was no rush to cut interest rates.
Chip stocks were hit particularly hard by both the prospect of continued tight monetary policy and investor disappointment over Taiwan Semiconductor Manufacturing Co’s decision to leave capital spending plans unchanged. Shares fell 6.6%.
A day earlier, ASML (AS:), the largest supplier of equipment to computer chip makers, reported weak new orders.
MSCI’s broadest index of Asia-Pacific shares fell 1.7%, after falling as much as 2.6% earlier.
The safe-haven yen rose 0.7% against the dollar, but was little changed in late trading of the day. The Swiss franc rose about 0.6% against the dollar, compared with a previous rise of as much as 1.2%.
Gold was up 0.3% at $2,385 an ounce but rose to $2,417.59, just shy of last week’s record high of $2,431.29.
Brent crude futures rose 4.2% and were last up 0.9% at $87.95. Iran is the third-largest oil producer in the Organization of Petroleum Exporting Countries, according to Reuters.
rose 1.6% to $64,559.
was last down 2.6%, while Taiwan’s stock index fell 3.8%. Hong Kong lost 0.9%.