Global shares fell on Friday as traders sought safer assets amidst escalating conflict in the Middle East. According to Reuters, MSCI’s broadest index of global equities dropped by 0.3 percent, while Europe’s Stoxx 600 share index slid by 0.4 percent. However, the real action in the markets was seen outside of equities. Gold was on track for its best week since a US banking crisis in mid-March, and oil was set for a strong weekly gain.
The Israeli military called for civilians to evacuate Gaza City, as it anticipated a ground invasion in response to devastating attacks by Hamas militants over the weekend. In retaliation, Hamas’ armed wing, Al-Qassam Brigades, launched 150 rockets towards the Israeli city of Ashkelon. The escalating conflict in the Middle East is causing concern among traders, who are closely monitoring the situation for potential supply disruptions in the region.
Trevor Greetham, the head of multi-asset at Royal London Asset Management, stated that the oil price could rise significantly as a result of the conflict. He emphasized that markets would review the situation daily.
Gold prices also rose on Friday, gaining 0.8 percent to reach $1,885 per ounce. This marks a weekly gain of 2.4 percent. Investors turned to gold as a safe-haven asset amidst the market uncertainty.
In the bond markets, US Treasuries experienced increased demand despite strong US inflation data released on Thursday. The benchmark 10-year Treasury yield dropped by 7 basis points to 4.639 percent. Similarly, Germany’s 10-year Bund yield fell by 4 bps to 2.74 percent. Euro area long-dated bond yields were also on track for their steepest weekly fall since mid-July as prices of core government debt rose.
The risk-off sentiment extended to the currency market, with the dollar maintaining most of its gains from Thursday night. The dollar eased by 0.122 percent against a basket of currencies, reaching 106.5. This came after a 0.8 percent gain overnight.
The Japanese yen faced pressure due to the dollar’s ascent, with the yen trading at 149.7 per dollar. This level is close to where the Bank of Japan has previously intervened to strengthen the currency.
In Asia, markets remained caught between concerns over higher dollar borrowing costs and a slowdown in China’s economy. MSCI’s index of equities outside Japan fell by 1.2 percent, remaining in negative territory for the year-to-date. Data released on Friday showed that China’s consumer prices were flat in September, while factory-gate prices contracted at a slower pace. Additionally, exports and imports continued to decline, albeit at a somewhat slower rate.
The Nikkei in Japan also experienced a decline, with a drop of 0.53 percent. The uncertainty in global markets and the ongoing tensions in the Middle East are contributing to a cautious sentiment among investors. Traders will closely monitor the situation in the coming days to assess any potential impact on the global economy and financial markets.
More detail via Arab News here… ( Image via Arab News )