Middle East Conflict Lifts Oil and Treasuries, Jobs Report Sparks Inflation Concerns: U.S. Stock Futures Slide, US

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U.S. Stock Futures Slide as Middle East Conflict Lifts Oil and Treasuries, Jobs Report Sparks Inflation Concerns

U.S. stock futures experienced a decline on Monday as the military conflict in the Middle East boosted oil and Treasuries. Furthermore, the release of the September U.S. jobs report raised concerns regarding inflation figures later in the week.

Oil prices surged by more than $3 a barrel due to the escalating conflict in the Middle East. The Israeli shekel initially hit its lowest point since early 2015, prompting the country’s central bank to offer to sell up to $30 billion for shekels. This prompt action helped the currency recover some of its losses, while the central bank also stated its intent to provide liquidity to the markets as needed.

Investors are concerned that the increase in oil prices might disrupt supplies from Iran. This, coupled with the ongoing conflict, has the potential to push Brent futures above $100 per barrel in the short term.

Gold also experienced a rise in demand, with prices increasing by 1.1% to $1,852 an ounce. In currency markets, the yen emerged as the primary gainer, although overall movements were modest. The Euro and the U.S. dollar both experienced slight declines against the yen.

The cautious sentiment in the market provided some relief for sovereign bonds after recent heavy selling. Yields were indicated to be around 4.74%, compared to 4.81% on Friday.

The positive U.S. jobs report led to expectations that interest rates will remain high for a longer duration. The upcoming data on September consumer prices will be another major test, as median forecasts indicate a 0.3% gain in both the headline and core measures. This is expected to slow down the annual pace of inflation.

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Market participants are closely watching the minutes of the last Federal Reserve meeting, which are scheduled for release this week. These minutes will provide insight into the seriousness of members regarding interest rate policies. At present, it appears that developments in the Middle East might discourage further rate hikes, potentially paving the way for a policy easing next year.

According to Fed fund futures, there is an 86% chance that rates will stay on hold in November. Additionally, around 75 basis points of cuts are priced in for 2024. China is also set to return from a holiday, with a flood of data expected, including consumer and producer inflation, trade, credit, and lending growth.

The news from the Middle East could adversely affect the start of the corporate earnings season, with several major companies reporting this week. Economists predict a 2% sales growth, a marginal contraction in margins, and flat EPS relative to last year.

Experts believe that near-trend economic growth, moderating inflation pressures, and resilient wage growth will support modest sales growth and slim margin improvement. However, substantial margin expansion is unlikely due to the current interest rate regime, wage growth, and investments in artificial intelligence among some tech firms.

In conclusion, U.S. stock futures have slid due to the military conflict in the Middle East, which has lifted oil and Treasuries. Additionally, concerns over inflation have been sparked by the sizzling September U.S. jobs report. The situation in the Middle East will likely have a significant impact on the market in the coming weeks, causing uncertainty for investors and analysts alike.

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Note: This article is generated by OpenAI’s language model.

Frequently Asked Questions (FAQs) Related to the Above News

What caused the decline in U.S. stock futures?

The decline in U.S. stock futures was primarily caused by the military conflict in the Middle East, which led to a surge in oil prices and increased demand for Treasuries.

How did the Middle East conflict impact oil prices?

The escalating conflict in the Middle East caused oil prices to surge by more than $3 a barrel. There are concerns that this increase in oil prices could disrupt supplies from Iran and potentially push Brent futures above $100 per barrel.

What other factors were affected by the Middle East conflict?

The Middle East conflict also had an impact on various financial markets. The Israeli shekel initially hit its lowest point in years, prompting the country's central bank to offer liquidity support. Additionally, gold prices increased due to a rise in demand, and currency markets experienced modest movements, with the yen emerging as the primary gainer.

What were the concerns raised by the September U.S. jobs report?

The September U.S. jobs report raised concerns regarding inflation figures later in the week. The positive jobs report led to expectations that interest rates will remain high for a longer duration, potentially slowing down the annual pace of inflation.

What will be a major test for the market in terms of inflation?

The upcoming data on September consumer prices will be a major test for the market in terms of inflation. Median forecasts indicate a 0.3% gain in both the headline and core measures, which is expected to impact the overall pace of inflation.

How might developments in the Middle East impact interest rate policies?

Developments in the Middle East, particularly the ongoing conflict, might discourage further rate hikes. This could potentially pave the way for a policy easing next year, depending on the seriousness of members in the Federal Reserve.

What are the expectations for corporate earnings in the upcoming season?

Economists predict a 2% sales growth, a marginal contraction in margins, and flat earnings per share (EPS) relative to last year in the upcoming corporate earnings season. Modest sales growth, moderate inflation pressures, and resilient wage growth are expected to support these figures.

What factors will limit substantial margin expansion in tech firms?

The current interest rate regime, wage growth, and investments in artificial intelligence among some tech firms are factors that are likely to limit substantial margin expansion in this industry.

How might the situation in the Middle East impact the market in the coming weeks?

The situation in the Middle East is expected to have a significant impact on the market in the coming weeks, causing uncertainty for investors and analysts alike. The ongoing conflict and its potential effects, such as oil price fluctuations, are likely to influence market dynamics.

Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.

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