Holidays in Japan and South Korea made for thin conditions but the initial bid was for bonds and the safe harbours of Japanese yen and gold, while oil prices jumped more than $3 a barrel
U.S. stock futures dropped on Monday as the military conflict in the Middle East raised oil and Treasuries, while the strong September U.S. jobs report raised the rate stakes for inflation figures later in the week.
Holidays in Japan and South Korea made for thin conditions but the initial bid was for bonds and the safe harbours of Japanese yen and gold, while oil prices jumped more than $3 a barrel.
The Israeli shekel initially dipped to its lowest since early 2015 at 3.9880 per dollar, prompting the country’s central bank to offer to sell up to $30 billion for shekels.
The prompt action helped the currency cut losses to 3.9050, while the central bank also said it would provide liquidity to markets as required.
The risk is higher oil prices, a drop in equities, and a jump in volatility supports the dollar and yen, and undermine ‘risk’ currencies, stated analysts at CBA.
Specifically, there was possibility oil supplies from Iran might be disrupted, they stated.
Given the tightness already facing physical oil markets in the fourth quarter of this year, an immediate drop in Iran’s oil exports risks pushing Brent futures above $US100/bbl in the short term, they added.
The danger of disruptions to supply was enough to drive Brent up $3.14 to $87.72 a barrel, while U.S. crude jumped $3.28 to $86.07 per barrel.
Gold was also in demand, gaining 1.1% to $1,852 an ounce.
In currency markets, the yen was the main gainer though moves were modest overall. The euro dropped 0.3% to 157.37 yen, while the dollar slumped 0.1% to 149.14 yen. The euro also declined 0.3% on the dollar to $1.0552.
The cautious mood was a respite for sovereign bonds after recent heavy selling and 10-year Treasury futures gained a modest 12 ticks. Yields were indicated near 4.74%, compared to 4.81% on Friday.