Middle East tensions pose inflation risk: ECB chief
Tensions in the Middle East and shipping disruptions in the Red Sea could push eurozone inflation higher again, European Central Bank president Christine Lagarde warned Thursday.
"Upside risks to inflation include the heightened geopolitical tensions especially in the Middle East which could push energy prices and freight costs higher in the near term and hamper global trade," she told reporters in Frankfurt.
Wall Street dipped and crude prices jumped on Wednesday as mounting tensions in the Middle East dampened risk appetite and raised oil supply concerns.
All three major US stock indexes were lower, with momentum stocks, led by Nvidia, Tesla Inc and Amazon.com, pulling the tech-heavy Nasdaq down most.
US President Joe Biden arrived in Israel after an attack on a hospital in the Gaza Strip derailed plans for a diplomatic summit with Arab leaders as the Israel-Hamas conflict continued unabated.
Adding to the headwinds, Nvidia revealed details regarding the extent to which US restrictions on chip exports to China could potentially affect its sales.
“Clearly, the Middle East situation is dominating other international news, including the ongoing fallout from the Biden administration increasing restrictions on chip sales to China,” said Jay Hatfield, portfolio manager at InfraCap in New York.
“It’s hard to be super bullish with that kind of risk out there. There’s a little bit of a flight to safety going on.” A string of quarterly profit beats, specifically from Morgan Stanley and Procter & Gamble, along with a sharp rebound in US housing starts, failed to stir much upside sentiment.
Elsewhere, Beijing reported China’s GDP grew at a faster-than-expected pace in the third quarter, suggesting the recovery of the world’s second-largest economy is gaining traction. The Dow Jones Industrial Average fell 202.65 points, or 0.6 percent, to 33,795, the S&P 500 lost 37.13 points, or 0.85 percent, to 4,336.07 and the Nasdaq Composite dropped 140.20 points, or 1.04 percent, to 13,393.55.
European shares slid as deepening fears of escalation of the Middle East conflict and a downbeat forecast for the semiconductor sector overshadowed upbeat Chinese economic data. The pan-European STOXX 600 index lost 1.13 percent and MSCI’s gauge of stocks across the globe shed 0.92pc.
Emerging market stocks lost 0.97 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.65 percent lower, while Japan’s Nikkei rose 0.01 percent.
Oil prices advanced as mounting strife in the Middle East appeared to pose a growing threat to supply.
US crude rose 1.67 percent to $88.11 per barrel and Brent was last at $91.22, up 1.47 percent on the day.
US Treasury yields resumed their uphill climb as a sharp rebound in US homebuilding pointed to economic resiliency. Benchmark 10-year notes last fell 14/32 in price to yield 4.9064 percent, from 4.847 percent late on Tuesday.
The 30-year bond last fell 28/32 in price to yield 5.0129 percent, from 4.951 percent late on Tuesday.
The greenback advanced against a basket of world currencies ahead of remarks expected from several Federal Reserve officials and as market participants kept a watchful eye on developments in the Middle East.
The dollar index rose 0.27 percent, with the euro down 0.38 percent to $1.0535. The Japanese yen strengthened 0.03 percent versus the greenback at 149.83 per dollar, while sterling was last trading at $1.2147, down 0.25 percent on the day.
Gold jumped to its highest level in more than a month as demand for the safe-haven metal was boosted by uncertainties surrounding the Israel-Hamas conflict.
Spot gold added 1.3 percent to $1,947.99 an ounce. Qatar is considering the plan on the hopes that more trading would raise investment returns, reduce costs and help with diversification, the people said. Any change may take place by the end of the year, but a final decision hasn’t been made.
If the country decides to proceed, it would be following in the footsteps of Saudi Arabia, which increased overall free float in 2021 after combining $29 billion of local and foreign stocks from Public Pension Agency and the General Organization of Social Insurance.