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