Stocks Braved Higher After Shaking Off Morning Weakness, Crude Oil Jumped 4%

Barry Adams
09 Oct, 2023
New York City

Stocks reversed morning slides and erased morning losses in Monday's trading after investors shifted focus to earnings releases ahead. 

Market indexes opened lower and fell in morning trading after crude oil surged following the flare up of Israeli-Hamas conflict.  

The surge in crude oil prices and rising geopolitical tensions overshadowed sentiment in early stock trading but investors shifted focus to domestic economy and rate path and upcoming corporate earnings.  

Crude oil surged as much as 4% and Israel declared war following rocket attacks from Hamas based in the West Bank and Gaza Strip. 

Hamas launched air attacks on 22 locations in Israel, surprising military establishment and intelligence agency Mossad for their collective failures in monitoring the militant group that is seeking independence of Palestine. 

Hamas is considered a terrorist group by Israel, the United States and the European Union but is revered as a freedom fighter group across the Middle East and financially backed by Iran. 

Israeli Prime Minister Benjamin Netanyahu declared a siege of Gaza Strip controlled by Hamas and the Israeli military stepped us its bombing attacks that have killed at least 550 Palestinians.  

For decades, Palestinians have been demanding an independent state and Israeli forces have been annexing land once owned by Palestinians and building homes for settlers. 

About half of Gaza's population is unemployed and youth unemployment rate is close to 60% with most of the food distribution and electricity supply in the enclave is controlled by Israeli military or government agencies. 

Neither Palestine nor Israel are significant players in the energy market, but the latest conflict may spill over to neighboring states and oil producing states in the region and disrupt crude oil distribution. 

Israeli shekel dropped to a seven-year low to 3.90 against the U.S. dollar and the Bank of Israel announced its plan to sell $30 billion and provided additional liquidity of $15 billion to support the falling shekel. 

 

U.S. Indexes & Yields 

The S&P 500 index increased 0.6% to 4,336.68 and the Nasdaq Composite rose 0.6% to 13,502.06. 

The U.S. bond market was closed on Monday to observe Columbus Day holiday but in Friday's trading U.S. Treasury yields advanced. 

The yield on 2-year Treasury notes increased to 5.10%, 10-year Treasury notes inched higher to 4.84% and 30-year Treasury bonds edged down to 5.0%. 

Crude oil increased $3.75 to $86.55 a barrel and natural gas prices increased 4 cents to $3.38 a thermal unit. 

The dollar index edged higher to 106.04, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

The surge in crude oil prices lifted energy stocks higher but airlines fell on the worries of higher fuel costs. 

Exxon Mobil, Chevron, Marathon Oil, Hess Corp and Occidental Petroleum jumped around 3%. 

United Airlines, Delta Air Lines and American Airlines dropped 3% after crude oil prices surged. 

Allied Pilots Association, the union of American Airlines' pilots issued a directive asking all its members to refuse to fly to Israel after the country declared war. 

Defense stocks advanced after the Israel and Hamas conflict escalated and at least 1,000 people have died in the recent attacks and counterattacks. 

Lockheed Martin, Northrop Grumman Corp and RTX Corporation advanced about 4%. 

 

European Markets Turned Lower After Middle-East Conflict Flared Up

European markets turned lower and extended previous week's losses but the resource heave index in London advanced. 

Investors were cautious in Monday's trading after violence erupted in the world's most dangerous region and Israel stepped up its bombing activities in Palestine after a Hamas controlled group carried out targeted missile attacks. 

The conflict escalated to the third day and at least 1,100 people have died so far after Israel carried out its most severe bombing campaign that included several civilian targets. 

 

German Industrial Production Declined In August

German industrial production decreased 0.2% from the previous month in August, deStatis reported Monday. 

Energy production declined 6.6% from the previous month, construction output fell 2.4% and machinery and capital equipment production declined 2.4%. 

But vehicle production soared 7.6% after falling 9.4% in July.

Industrial production estimate was downwardly revised to a decline of 0.6% in July. 

From a year ago, production shrank 2% after contracting 1.7% in July, the statistical bureau reported. 

 

Natural Gas Prices Surged 10% 

Crude oil prices jumped more than 4% after investors got first chance to react to the news of Israel-Palestine war 

Natural gas futures soared 10% after a leak was reported in the pipe network between Estonia and Finland.

The sudden drop in pressure in the natural gas flow, forced authorities to shutdown flow and repair works could take several months. 

Ample natural gas supplies and above average temperatures this month along with weakening industrial activities have kept natural gas prices relatively stable. 

Prices are still significantly lower than a year ago when prices were above €60 per MWh.   

 

Europe Indexes & Yields

The DAX index decreased 0.8% to 15,128.11, the CAC-40 index fell 0.6% to 7,021.40 and the FTSE 100 index fell 0.03% to 7,492.21.

The yield on 10-year German bonds decreased to 2.87%, French bonds traded lower to 3.46%, the UK gilts edged down to 4.56% and Italian bonds rose to 4.95%.

The euro edged lower to a three-month low to $1.051, the British pound to $1.218 and the U.S. dollar fetched 90.81 Swiss cents.

Brent crude increased $3.75 to $88.44 a barrel and the Dutch TTF natural gas edged lower by €5.72 to €43.95 per MWh.

 

Europe Stock Movers 

Vitesco Technologies Group AG soared 20% to €91.15 after its largest and a majority shareholder Schaeffler launched a takeover offer for 91.0 to solidify its presence in the electric vehicles supply chain from passenger cars to trucks to trains.

The deal values the company at 3.64 billion and Schaeffler said as a part of the offer it will simplify shareholder structure to convert preferred shares to common shares, putting all shareholders on common footings.   

Energy stocks advanced after crude oil prices surged 4% and air transportation stocks declined. 

TotalEnergies, Repsol, BP Plc and Shell jumped between 1% and 3% after the Middle East conflict flared up. 

Lufthansa, Air France KLM and the parent of British Air IAG declined between 3% and 4%. 

Defense companies were in focus and traded higher. 

Rhienmetall AG jumped 4.5% to €245.0, Leonardo SpA added 4.3% to €13.48 and Saab AB advanced 7.2% to skr 562.00. 

Metro Bank Holdings Plc jumped 15% to 51.82 pence on reports that Bank of England held preliminary discussion with large banks amid search for a buyer for the troubled bank.