Shares in Europe are expected to rebound following overnight losses as investors focus on comments made by U.S. Federal Reserve officials. European stocks had initially dropped due to the weekend attack by Hamas on Israel. However, remarks by Dallas Fed President Lorie Logan and Fed Vice Chair Philip Jefferson, which indicated a rise in long-term Treasury yields, have eased concerns about further interest rate hikes. The U.S. dollar has weakened slightly due to falling Treasury yields. Dovish comments by Fed officials overnight have also led to a decrease in the possibility of a rate increase in November.
Treasury yields in Asia have dropped as traders assess the impact of the war in Israel and Gaza on the U.S. bond markets. Uncertainty surrounds how the conflict will play out and its effect on oil prices and inflation. Despite a technical correction, oil prices are likely to remain high due to continued tensions in the Middle East. Gold prices have risen due to potential safe-haven demand resulting from geopolitical tensions. Copper prices have risen as Chinese buyers return from a week-long holiday and industry experts gather for the annual London Metal Exchange week. However, analysts warn that concerns over weak Chinese copper demand persist. Iron ore prices have fallen due to lackluster property sales in China during the Golden Week holidays, indicating potentially softer demand for the construction material. Steel mills are considering production cuts during winter due to unfavorable margins, which would also negatively impact steelmaking ore demand.
In other news, Israel faces the risk of a wider conflict as it combats Hamas in the Gaza Strip. The country is concerned that Iran may direct the Lebanese Hezbollah to open a second front in the north. Hezbollah and Israel have already engaged in limited artillery exchanges. The U.S. has warned Hezbollah to “think twice” before opening a second front and has expressed preparedness to come to Israel’s defense. Furthermore, Federal Reserve Vice Chair for Supervision Michael Barr has defended higher capital requirements for large U.S. banks, stating that they will strengthen the financial system. However, the bank industry argues that these rules will hinder growth.
Israel has ordered Chevron to shut down natural gas production at one of its offshore platforms in the Eastern Mediterranean Sea due to the ongoing conflict. The shutdown is a safety precaution, but it highlights the risks faced by Chevron as it tries to expand its presence in the region. Meanwhile, the U.S. is preparing to crack down on the evasion of sanctions on the Russian oil industry. Treasury Secretary Janet Yellen has stated that the U.S. will likely take steps to enforce the $60-a-barrel price limit imposed on Russian oil sales.
Lastly, Chinese property giant Country Garden has failed to make an international debt payment after apartment sales dropped in September. The company is facing a liquidity crisis and expects to default on its U.S. dollar bond and other offshore debt obligations. Country Garden has hired financial advisers and plans to hold talks with its offshore creditors.
Overall, the global markets are experiencing fluctuations due to geopolitical tensions and uncertainty surrounding the impact of ongoing conflicts on various industries.
More detail via Morningstar here… ( Image via Morningstar )