(Bloomberg) — Crude tumbled and bonds fell, while US equity futures rose as a sense of relief percolated through markets after Israel’s retaliatory strikes against Iran avoided oil facilities.
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Contracts on the S&P 500 and Nasdaq 100 signaled a rebound on Wall Street after the S&P 500 clocked its first weekly decline in seven. European stock futures also gained. The 10-year Treasury yield jumped four basis points to 4.28%, the highest in more than three months, while a gauge of the dollar was steady.
Oil slumped more than 5% at one point, while gold also edged lower.
Iran said its oil industry was operating normally following Israel’s attacks on military targets across the country. That brought some easing of geo-political tension as markets prepare for a week packed with corporate earnings and key economic data, with the US presidential election also drawing near.
“The measured and targeted response from Israel has increased hopes of de-escalation,” Warren Patterson, head of commodities strategy at ING in Singapore, wrote in a note. “If we do see some de-escalation it would allow fundamentals once again to dictate price direction.”
Among events coming up this week are results for five of the “Magnificent Seven” big-tech behemoths, which are expected to post their slowest collective quarterly earnings expansion in six quarters, according to data compiled by Bloomberg Intelligence. Also coming up are the UK budget, eurozone and US growth prints as well as a payrolls report. And then there’s the presidential election on Nov. 5.
For the US bond market, already stung by the worst selloff in six months, the coming days will be crucial, as they feature the Treasury Department’s announcement on Wednesday on the scale of its debt sales.
In currency markets, the yen was in the spotlight with a drop to its weakest level in about three months against the dollar, after a gamble by Prime Minister Shigeru Ishiba to call a snap election backfired. The weaker yen, which benefits the nation’s export-oriented economy, helped push the Topix index up by as much as 1.8%.
“Things have already got going, with the weekend bringing a couple of developments that need to be dealt with immediately, before contemplating the mountain of event risk that looms like Everest over price action,” said Michael Brown, a senior research strategist at Pepperstone Group Ltd. “Further de-risking could well be seen short-term, with potential downside moves likely to be exacerbated were this week’s Big Tech earnings to fall short of expectations.”
