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Stocks Reel After Attacks As Shelter Supply Dissipates: Market Closes

(Bloomberg) — An escalation in tensions in the Middle East kept stock markets on edge, although safe-haven assets such as bonds and the dollar gave up some early gains after Iranian media appeared to downplay the impact of Israeli attacks.

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U.S. Treasury bonds have reversed an early move that sent the 10-year yield down as much as 14 basis points after Israel launched a retaliatory attack on Iran less than a week after Tehran fired missiles and drones, according to two U.S. officials had.

Oil erased an earlier strong jump above $90 a barrel and the dollar gave up some early gains. An Iranian military official signaled that Tehran did not feel compelled to respond to the explosions, which U.S. officials said were caused by Israeli attacks. The semi-official Mehr agency quoted army commander Abdolrahim Mousavi as saying Tehran had already responded to Israeli threats.

“Markets tend to overreact at first,” Nathan Sheets, chief global economist at Citigroup Inc., said in an interview with Bloomberg TV. “This overreaction reflects the uncertainty premium when it first erupts, but typically these events end up being less disruptive than we feared.”

The latest moves cap a dismal week for markets after solid economic data and hawkish comments from the Fed increased speculation that U.S. interest rates will remain higher for longer. The Stoxx Europe 600 index fell 0.7%, posting its third straight week of losses. Futures on the S&P 500 and Nasdaq 100 fell 0.5% and 0.8%, respectively.

“Even without an escalation, the combination of mixed earnings and geopolitical headwinds this week was a catalyst for unwinding crowded equity longs,” said Viraj Patel, global macro strategist at Vanda Research.

As traders grapple with a robust U.S. economy and stubborn inflation, they have been forced to scale back their bets on rate cuts this year. New York Fed President John Williams said that while this was not his baseline expectation, a rate hike was even possible if warranted. His Atlanta counterpart, Raphael Bostic, said he did not believe easing before the end of 2024 would be appropriate. The Fed could keep interest rates stable throughout the year, Minneapolis Fed Chairman Neel Kashkari told Fox News Channel.

Among individual gainers, Taiwan Semiconductor Manufacturing Co. fell after the company downgraded its chip industry's revenue growth outlook, citing a weaker recovery in the smartphone and PC sectors. Infosys Ltd. fell in the US after forecasting weak sales growth for the year.

The story goes on

Important events this week:

  • BOE Deputy Governor Dave Ramsden and Governing Council member Joachim Nagel speak on Friday

  • Chicago Fed President Austan Goolsbee speaks Friday

Some of the key moves in the markets:


  • The Stoxx Europe 600 fell 0.7% at 10:08 a.m. London time

  • S&P 500 futures fell 0.5%

  • Nasdaq 100 futures fell 0.8%

  • Futures on the Dow Jones Industrial Average fell 0.4%

  • The MSCI Asia Pacific Index fell 1.7%

  • The MSCI Emerging Markets Index fell 1.6%


  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro was little changed at $1.0651

  • The Japanese yen rose 0.1% to 154.47 per dollar

  • The offshore yuan was little changed at 7.2530 per dollar

  • The British pound was little changed at $1.2446


  • Bitcoin rose 1.7% to $64,603.34

  • Ether rose 1.3% to $3,109.81

Tie up

  • The 10-year Treasury yield fell five basis points to 4.58%

  • The 10-year German government bond yield fell three basis points to 2.46%

  • The 10-year UK government bond yield fell two basis points to 4.25%

raw materials

  • Brent crude rose 0.3% to $87.39 a barrel

  • Spot gold rose 0.3% to $2,385.37 an ounce

This story was produced with support from Bloomberg Automation.

– With support from Isolde MacDonogh, Anna Edwards and Kriti Gupta.

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