By Marc Jones
LONDON (Reuters) – Europe’s main stock and currency markets started the week slightly higher, while oil and bond prices fell as investors kept Middle East worries in check following Iranian attacks on Israel this week. weekend.
Tehran’s offensive involved more than 300 missiles and drones, and was the first against Israel from another country in more than three decades, but after a sharp selloff on Friday and with major powers calling for restraint, the moves Monday’s market showed an element of relief.
Oil prices, which rose 10% due to heightened tensions over the past month, fell 1%, the Israeli shekel rose 1% and the pan-European STOXX 600 index climbed 0 .3%, although led by defense sector stocks.
Gold, which has been at record highs for weeks, rose 0.3% but the dollar and ultra-safe government bonds [GVD/EUR] which fund managers often turn to when geopolitical tensions rise, were all inferior.
Robert Alster, chief investment officer of Brothers Asset Management, said the hope was that U.S. and Gulf diplomatic efforts would now prevent a further serious escalation of unrest in the Middle East.
“There is a general belief (among investors) that the situation is not going to get worse,” Alster said, noting that oil prices had not risen above their September peak of $96 a barrel. “It was tit for tat and I hope now we will move on.”
Another busy week of economic data and corporate results is also expected, and the spring meetings of the International Monetary Fund, which can shape the global discourse, also begin.
One of those data points is U.S. retail sales later. The dollar index, which measures the currency against a basket of six other currencies, was steady at 105.92, just below Friday’s 5-1/2 month high of 106.11.
It did, however, hit a fresh 34-year high against the Japanese yen on growing expectations that persistent inflation would keep U.S. interest rates high for longer and Tokyo has yet to rush in to intervene in the foreign exchange markets.
WAIT AND WATCH
U.S. stock futures rose, following a sharp sell-off on Wall Street on Friday, also fueled by dwindling hopes for a rate cut and a string of disappointing bank results. [.N]
MSCI’s broadest index of Asia-Pacific shares outside Japan fell as much as 0.7% overnight, although a sense of nervousness gripped the region. Japan’s Nikkei slipped 1%, while Australia’s S&P/ASX 200 index lost almost 0.5%.
The threat of open war between Iran and Israel, great enemies of the Middle East, and involving the United States, leaves the region in suspense. US President Joe Biden has warned Israeli Prime Minister Benjamin Netanyahu that the United States will not participate in a counter-offensive against Iran.
Israel said “the campaign is not yet over.”
Oil prices showed that traders had largely priced in a retaliatory attack from Iran, which could lead to tougher sanctions on Iranian oil. This saw Brent crude futures peak at $92.18 a barrel last week, the highest level since October.
Monday’s 1% drop left Brent below $90 a barrel, US West Texas Intermediate crude futures at just under $85 a barrel while gold was slightly higher at $2 $351 per ounce. [O/R]
“It’s kind of a wait and see for the markets because we’re waiting to see how Israel reacts and how Iran’s proxies react,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
(Reporting by Marc Jones; Additional reporting by Rae Wee in Singapore; Editing by Susan Fenton)
