Wall Street higher as stocks shrug off geopolitical risks, oil soars

The US stock markets shrugged off early losses and finished higher despite escalating Middle East tensions that were sparked by Hamas’ surprising attack on Israel on Saturday. Energy and Industrial stocks led to broad gains due to a surge in oil and gas prices and a jump in defense stocks. Crude oil futures surged more than 4%, while the weapon maker, Lockheed Martin’s shares and the aerospace manufacturer, Raytheon Technologies, jumped 8.8% and 4.5%, respectively. But airline shares broadly slumped as soaring oil prices weighed on cost, and flights were cancelled in the disruptive areas. Most big tech shares were also higher in the run-up to the quarterly earnings season as risk-on sentiment recovered from the bond turmoil in the past two months.

The US bond markets closed on Monday, but the US dollar edged lower, weakening against most other G-10 currencies as markets may have priced in a slide in the government bond yields on the return tonight. At the same time, risk-off sentiment and a softened US dollar sent gold futures soaring US$30 per ounce, the best single-day performance since early May.

China’s stock markets fell on the return after the Golden Week holiday as investors were not satisfied by the consumer spending data, despite a jump on a yearly basis but was lower than the market’s expectations. The Australian stock markets finished higher due to strong performance in the Energy and Material sectors. Futures point to a higher open across Asia. The Nikkei 225 futures were up 0.83%, the ASX 200 futures rose 0.52%, and Hang Seng Index futures were up 0.48%.

Price movers:

• All 11 sectors in the S&P 500 finished lower, with Energy leading gains, up 3.54%. Industrials, Real Estate, and Utilities all rose more than 1%. Consumer Staples and Consumer Discretionary underperformed as sticky inflation and high-interest rates weighed on spending power.
• Crude oil prices surged more than 4% amid the Israel-Hamas conflicts, with all eyes on Iran’s response to the unrest, which was potentially linked to the attack. Risks of reduction of oil supply from Iran may keep oil prices at the current high levels, but otherwise, crude prices may extend the sharp decline after a short-term rebound.
• Disney’s share rose 2%, rebounding from a nine-year low level amid news that the activist investor Nelson Peltz would seek multiple board seats. Peltz’s hedge fund Traina Fund Management increased its stake to a reported US$2.5 billion, according to The Wall Street Journal.
• Tesla’s shares fell 2% before paring losses as China’s EV sales fell in September. According to the China Passenger Car Association, sales of China-made electric vehicles were down 11% year on year for the month. The EV makers reported the third-quarter delivery number that was lower than expected last week. But its share price showed resilient moves ahead of the third quarter earnings report next week.
• Evergrande’s shares fell 13%, extending a four-day losing streak amid the ongoing debt turmoil. The Chinese developer canceled a debt restructuring meeting in September and left its US$6 billion bond holders unaddressed.

ASX and NZX announcements/news:

• No major announcement.

Today’s agenda:

• NAB Business Confidence for September
• Chinese New Yuan Loans and M2 Money Supply

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