Treasuries fall as US seeks to limit Gaza war: Markets wrap

Treasuries declined as ongoing diplomatic efforts to help prevent the Israel-Hamas war from expanding into a wider conflict reduced demand for haven assets.

Yields on the US 10-year benchmark climbed higher than 4.7%, while those on the 30-year rose over five basis points, with the selloff steepening the yield curve further. Gold fell for a second day, as did oil.

US President Joe Biden is set to visit Israel Wednesday as part of a push to prevent the war from spreading. Secretary of State Antony Blinken also returned to Israel to meet Prime Minister Benjamin Netanyahu, after talks with Arab governments. Russian President Vladimir Putin held a call with the leaders of Egypt, Syria, Iran and the Palestinian Authority, and the Kremlin said there was a “unanimous opinion” on the need for a cease-fire. He spoke separately with Netanyahu.

The increase in yields came as investors grapple with the Federal Reserve’s willingness to hold interest rates higher for longer. Philadelphia Fed President Patrick Harker on Monday repeated comments he made last week asserting the central bank can hold its benchmark rate steady as long as there is not a sharp turn in the economic data.

“It’s seems that with the Middle East conflict in a holding pattern, bonds have lost the little bit of demand they garnered from last week’s safe-haven flows, sending yields inadvertently higher,” said Matthew Simpson, a senior market strategist at City Index.

Elsewhere, the dollar steadied after falling in the previous session, while the kiwi was the worst performer among Group-of-10 peers as the nation reported slower-than-expected inflation.

In stocks, an Asian equity gauge snapped a two-day decline while contracts for US equities slipped after both the S&P 500 and the Nasdaq 100 rose on Monday. Rio Tinto Plc climbed the most in a month following a report which showed the miner recorded a higher-than-expected increase in copper production for the third quarter.

Eyes on earnings

Aside from geopolitics, traders will also be focused on comments from a slew of Federal Reserve speakers this week and on corporate results.

“Fed speak could continue to be a key driver this week before the blackout period ahead of the November FOMC meeting,” said Charu Chanana, a market strategist at Saxo Capital Markets.

Investors looking to earnings season for a dose of good news are hanging their hopes on a familiar group: Big Tech.

The five biggest companies in the S&P 500 — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc. and Nvidia Corp. — account for about a quarter of the benchmark’s market capitalization. Their earnings are projected to jump 34% from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.

Back in Asia, Country Garden Holdings Co. is on the radar as the clock is ticking for the distressed developer to pay interest on a dollar bond. The builder, which has become a symbol of China’s broader property debt crisis, must pay a $15.4 million coupon by the end of a 30-day grace period Oct. 17-18 before a default can be called.

Key events this week:

• Chinese President Xi Jinping hosts world leaders at the Belt and Road Initiative forum from Tuesday to Wednesday, with Russian President Vladimir Putin expected to attend
• Joint European Central Bank/IMF policy and research conference, Tuesday
• Germany ZEW survey expectations, Tuesday
• UK jobless claims, unemployment, Tuesday
• US retail sales, business inventories, industrial production, Tuesday
• Goldman Sachs, Bank of America earnings, Tuesday
• New York Fed President John Williams moderates discussion, while Richmond Fed President Tom Barkin speaks at a separate event, Tuesday
• Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday
• China GDP, retail sales, industrial production, Wednesday
• UK CPI, Wednesday
• Eurozone CPI, Wednesday
• Morgan Stanley, Netflix, Tesla earnings, Wednesday
• Federal Reserve issues Beige Book economic survey, Wednesday
• Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
• Australia unemployment, Thursday
• Japan trade, Thursday
• China property prices, Thursday
• US initial jobless claims, existing home sales, leading index, Thursday
• Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
• Japan CPI, Friday
• China loan prime rates, Friday
• Philadelphia Fed President Patrick Harker speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 6:40 a.m. London time. The S&P 500 rose 1.1%
• Nasdaq 100 futures fell 0.1%. The Nasdaq 100 increased 1.2%
• Japan’s Topix rose 0.6%
• Hong Kong’s Hang Seng rose 0.7%
• The Shanghai Composite rose 0.1%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.1% to $1.0546
• The Japanese yen was little changed at 149.59 per dollar
• The offshore yuan fell 0.1% to 7.3181 per dollar
• The Australian dollar rose 0.1% to $0.6351
• The British pound fell 0.2% to $1.2197

Cryptocurrencies

• Bitcoin fell 0.8% to $28,178.51
• Ether was little changed at $1,586.65

Bonds

• The yield on 10-year Treasuries advanced five basis points to 4.75%
• Japan’s 10-year yield advanced three basis points to 0.780%
• Australia’s 10-year yield advanced nine basis points to 4.55%

Commodities

• West Texas Intermediate crude fell 0.3% to $86.44 a barrel
• Spot gold fell 0.2% to $1 915.49 an ounce