Stocks and Bonds Drift Ahead of Biden’s Israel Visit: Markets Wrap

(Bloomberg) — Stocks struggled for direction and bonds pared declines as investors closely watched diplomatic efforts to contain the war between Israel and Hamas, including a visit by U.S. President Joe Biden to the region scheduled for Wednesday.

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European Stoxx 600 index and U.S. stock futures remained in tight ranges as traders braced for a wave of major earnings, including Goldman Sachs Group, Bank of America Corp and Johnson & Johnson.

Ericsson AB shares fell more than 9% after the Swedish 5G equipment manufacturer warned of continued weak demand. Rolls Royce Holdings Plc shares rose after the jet engine maker announced plans to cut jobs and simplify its business. Polish stocks and the currency extended their gains after Sunday’s elections, which gave pro-EU parties a majority in parliament.

Yields on US 10-year bonds rose to above 4.7%, but were far from their highest levels during the day. The dollar rose, while the Israeli shekel continued its decline after falling to more than 4 to the dollar on Monday. Brent crude oil was trading near $90 per barrel.

Biden is scheduled to travel to Israel on Wednesday as part of a campaign to prevent the conflict from spreading. Secretary of State Anthony Blinken also returned to Israel to meet with Prime Minister Benjamin Netanyahu, after talks with Arab governments. Russian President Vladimir Putin made a phone call with the leaders of Egypt, Syria, Iran and the Palestinian Authority.

“Markets fear a ground attack by Israel that could spark a larger, more complex regional conflict that threatens regional supply chains, energy production, economic growth and financial stability,” said Kyle Rodda, senior market analyst at Capital.com. “President Biden’s presence in the region will likely reduce the odds of such an attack in the coming days, providing markets with some breathing room, if only for a small window.”

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Read more: Is the market calm in the Middle East true or dangerous?: John Authers

Elsewhere, the pound weakened after a decline in wage growth in the UK, suggesting easing labor market pressures will make it easier for the Bank of England to keep interest rates unchanged next month.

Investors will be closely watching the next batch of corporate results, after Wall Street strategists warned that earnings expectations were weakening. Goldman Sachs and Bank of America are at the center of attention after JPMorgan Chase & Co., the largest U.S. bank, reported its fourth quarter of record net interest income and boosted its outlook for the year at the end of last week, while Citigroup Inc. The results topped analysts’ estimates.

An update is also scheduled for Tuesday from United Airlines Holdings Inc. Before Netflix Inc. And Tesla Inc. Technology-related earnings on Wednesday.

Aside from geopolitics and earnings, traders are tracking the comments of a slew of Fed spokespeople this week ahead of the start of the blackout period ahead of the central bank’s rate-setting meeting in November. Philadelphia Fed President Patrick Harker on Monday reiterated comments he made last week asserting that the central bank can keep its benchmark interest rate steady as long as there is no sharp turn in economic data.

In Asia, a gauge of stocks in the region halted a two-day decline. Country Garden Holdings is on the radar as the clock ticks for the struggling developer to pay interest on its bonds in dollars. The construction company, which has become a symbol of China’s broader mortgage debt crisis, must pay a $15.4 million coupon at the end of a 30-day grace period from October 17-18 before a default can be declared.

Main events this week:

• Chinese President Xi Jinping will host world leaders at the Belt and Road Initiative Forum from Tuesday to Wednesday, and Russian President Vladimir Putin is expected to attend.

• Joint policy and research conference between the European Central Bank and the International Monetary Fund, Tuesday

• German ZEW survey forecast, Tuesday

• UK Unemployment Claims, Unemployment, Tuesday

• US Retail Sales, Business Inventories, Industrial Production, Tuesday

• Goldman Sachs, Bank of America earnings, Tuesday

• New York Fed President John Williams will moderate the discussion, while Richmond Fed President Tom Barkin will speak at a separate event on Tuesday.

• Reserve Bank of Australia Governor Michelle Bullock speaks on Wednesday

• China GDP, Retail Sales, Industrial Production, Wednesday

• UK Consumer Price Index, Wednesday

• Eurozone consumer price index, Wednesday

• Morgan Stanley, Netflix and Tesla earnings Wednesday

• The Federal Reserve releases its “Beige Book” economic survey on Wednesday

• Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak on separate occasions, Wednesday

• Unemployment in Australia, Thursday

• Japanese Trade, Thursday

• Real estate prices in China today, Thursday

• US Initial Jobless Claims, Existing Home Sales, leading indicator, Thursday

• Fed Chairman Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, and Dallas Fed President Lori Logan speak at various events Thursday.

• Japanese Consumer Price Index, Friday

• Interest rates on Chinese loans, Friday

• Philadelphia Federal Reserve Bank President Patrick Harker speaks on Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was down 0.1% as of 9:56 a.m. London time

• S&P 500 futures fell 0.3%

• Nasdaq 100 futures fell 0.3%

• Dow Jones Industrial Average futures fell 0.3%

• MSCI Asia Pacific Stock Index rises 0.6%

• MSCI Emerging Markets Index rises 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%.

• The euro fell 0.2 percent to $1.0535

• The Japanese yen fell 0.1 percent to 149.68 yen to the dollar

• The yuan in external transactions fell 0.2 percent to 7.3214 per dollar

• The British pound fell 0.5 percent to $1.2153

Digital currencies

• Bitcoin rose 0.2% to $28,463.6

• Ether was little changed at $1,588.21

Bonds

• The yield on the 10-year Treasury note rose four basis points to 4.74%.

• The yield on 10-year German bonds rose two basis points to 2.80%.

• There was little change in the yield on British bonds for 10 years at 4.47%.

Goods

This story was produced with assistance from Bloomberg Automation.

–With assistance from Toby Alder, Tasya Sibahutar, Robert Brand, and Sujata Rao.

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