by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall on Monday and the main European stock markets are moving on a cautious note at mid-session, the conflict between Israel and Palestinian Hamas having awakened the threat of destabilization in the Middle East, which particularly favors a retreat towards safe assets, with the dollar and gold rising significantly, while volatility rises and oil prices climb.
New York index futures signal Wall Street opening down 0.49% for the Dow Jones, 0.63% for the Standard & Poor’s 500 and 0.81% for the Nasdaq.
In Paris, the CAC 40 lost 0.53% to 7,022.71 points around 11:30 GMT. In Frankfurt, the Dax lost 0.75%. In London, the FTSE, driven by oil stocks, gained 0.23%.
The pan-European FTSEurofirst 300 index fell by 0.1%, the eurozone’s EuroStoxx 50 by 0.71% and the Stoxx 600 by 0.21%.
Clashes continued on Monday between the Israeli army and Hamas fighters two days after the surprise attack by the Palestinian group, causing investors to fear a regional conflagration.
“A risk-averse attitude may well prevail for the moment, at least until the scale of the conflict becomes clearer,” notes Chris Beauchamp, market analyst at IG.
A sign of fear on the markets, the volatility index on the Euro Stoxx 50 climbed 7.95% to 20.12 points, while its American equivalent jumped 9.85% to 19.17%.
“The broader risk is that a sustained rise in oil prices will act as further inflationary pressure and further reinforce the message of rising rates for a long time,” writes Russ Mould, investment director at AJ Bell.
The energy index in Europe advances by 2.49% in the wake of oil prices which are increasing by more than 3%.
VALUES TO FOLLOW AT WALL STREET
The American defense groups Lockheed Martin, RTX and Northrop Grumman gained from 4.3% to 5.75% in pre-market trading against a backdrop of risk of geopolitical tensions in the Middle East.
Companies specializing in cybersecurity such as Check Point Security, Cyberark and Sentinelone lost 2% to 4.2% in pre-market trading, with JPMorgan seeing a risk on these values ”significantly exposed” to Israel.
VALUES IN EUROPE
The defense groups Saab, Leonardo and Rheinmetall jumped from 4.36% to 7.51% in the perspective of a prolonged military conflict in the Middle East.
The airlines IAG, Air France and Lufthansa, on the other hand, fell by 5.149%, 3.85% and 3.67% respectively, with several air carriers having suspended their flights to Tel Aviv.
The transport and leisure index lost 1.13%.
OIL
Uncertainties over the new conflict between Israel and Hamas are driving the oil markets. OPEC also revised upwards its long-term crude demand forecast, estimating that demand will reach 116 million barrels per day in 2045.
Brent rose 3.54% to $87.57 per barrel and American light crude (West Texas Intermediate, WTI) rose 3.73% to $85.88.
RATE
US bond markets are closed this Monday.
In Europe, risk aversion is causing strong demand for sovereign bonds, considered safe haven assets. This demand causes the price of bonds to rise and at the same time yields to fall: that of ten-year German government bonds drops more than two basis points, to 2.873% after falling during the session to 2.828%.
CHANGES
The dollar, the refuge currency par excellence, gained 0.41% against a basket of reference currencies.
The Japanese currency, another safe haven asset, is also in demand, advancing 0.12% to 149.14 yen per dollar, despite the closure of Japanese stock markets due to a public holiday.
The euro, on the other hand, fell 0.52% to 1.0531 dollars, while the pound sterling lost 0.51% to 1.217 dollars.
GOLD
Gold, also a safe haven asset, jumped 0.92% to $1,849.04 per ounce, as the military conflict between Israeli forces and the Palestinian Islamist group Hamas increased political uncertainty in the Middle East.
NO MORE MAJOR ECONOMIC INDICATOR ON THE AGENDA FOR OCTOBER 9
(Written by Claude Chendjou, edited by Blandine Hénault)
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