By Louis Krauskopf
NEW YORK (Reuters) – Investors are awaiting early this week any signs of a possible escalation of the conflict in the Middle East, a conflict that may further turbulent markets that are already anticipating a busy week in which the Federal Reserve (the US central bank) will issue a statement regarding monetary policy and corporate results. Apple (NASDAQ:).
Yesterday, Friday, the ground forces and air force intensified operations in the Gaza Strip, about three weeks after the Palestinian Islamic Resistance Movement (Hamas) launched an attack on southern Israel.
Investors’ fears of the expansion of the conflict have increased in the past few days after the United States sent more military equipment to the Middle East at the same time as Israel attacks targets in Gaza and Hamas supporters in and Syria.
“The situation in Israel… is causing a lot of concern,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab (NYSE).
Crude futures rose 2.9 percent to 90.48 yesterday, Friday, at settlement, thanks to fears that the conflict will disrupt supplies. Gold, which is considered a safe haven for worried investors, jumped in instant transactions to more than two thousand dollars for the first time since mid-May.
The oil market’s response to the conflict has been “weak” so far, analysts at Capital Economics said in a note on Friday.
“However, any sign that other countries in the region will become more involved in the conflict will cause oil prices to rise sharply,” they wrote.
If the escalation of the conflict causes a surge in war-related US spending that widens the deficit, returns will exceed the 16-year highs they have already reached, said Peter Cardillo, chief market economist at Spartan Capital Securities.
Some investors also expect that the expansion of the conflict will cause them to buy Treasury bonds as a safe haven. This may stem the rise in bond yields, which move in the opposite direction to prices, and this in turn may ease pressures on stocks and other assets.
The Standard & Poor’s 500 index has fallen more than ten percent since late July, when it recorded its highest levels in 2023, but the index is up more than seven percent since the beginning of the year.
“So far, US government bonds have not performed their usual safe-haven function,” UBS Global Wealth Management said in a note on Friday. “But escalation of the conflict will likely shift attention away from monetary policy concerns and boost demand for safe-haven Treasury bonds,” she added.
The US central bank is scheduled to issue its latest monetary policy statement on Wednesday, while Apple’s quarterly results are expected to highlight another busy week of corporate reports.
(Prepared by Muhammad Aysem for the Arabic Bulletin – Edited by Doaa Muhammad)
2023-10-28 20:28:00
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