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Equities gain, gold drops as fears of wider Middle East conflict ease

Published 22/04/2024, 03:42
© Reuters. FILE PHOTO: A man walks under an electronic screen showing Japan's Nikkei share price index inside a conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato/File Photo
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By Chris Prentice and Alun John

NEW YORK/LONDON (Reuters) -Investors scaled back safe-haven bets on Monday as worries over a wider Middle East conflict eased, boosting world equities and pressuring gold, oil and bond prices.

MSCI's gauge of stocks across the globe rose 6.01 points, or 0.81%, to 749.29.

In a reversal of Friday's "risk off" mood, spot gold lost 2.59% to $2,328.65 an ounce, poised for its biggest one-day drop since June 2022.

On Wall Street, the Dow Jones Industrial Average rose 253.58 points, or 0.67%, to 38,239.98, the S&P 500 gained 43.37 points, or 0.87%, to 5,010.60 and the Nasdaq Composite gained 169.30 points, or 1.11%, to 15,451.31.

Investors have taken cautious positions on Fridays in recent weeks, fearing an escalation in the conflict in the Middle East over the weekend when markets are closed and they are unable to trade.

"It seems neither Israel nor Iran want an escalation in the crisis in the Middle East," said Kazuo Kamitani, a strategist at Nomura Securities. "With a subsequent strike from either side not looking like it's coming, investor concerns have eased somewhat."

But expectations of Federal Reserve interest rate cuts and concerns about chip sector earnings will continue to keep investors on their toes, he said.

More than 150 companies in the S&P 500 and 173 companies in the STOXX 600 are slated to report first-quarter results this week, according to data from LSEG Workspace (LON:WKP).

These include several big European banks, as well as U.S. tech giants Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL), with the latter in particular focus after chip maker Nvidia (NASDAQ:NVDA)'s 10% drop on Friday, its biggest percentage fall in four years.

The STOXX 600 index rose 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.08%.

Traders were expecting the first Fed rate cut as most likely coming in September following Consumer Price Index data earlier this month, though July was also seen as possible.

"The big picture in equities is that they have been able to digest this push back in rate expectations," said Karim Chedid, Blackrock (NYSE:BLK)'s chief investment strategist for iShares EMEA.

"Now earnings have to deliver for them to continue to do well."

London's commodities-heavy FTSE-100 rose 1.62%, nearing an all-time high as tin and nickel rose to multi-month peaks. [.L][MET/L]

It was outpaced by a more than 3% gain for the Portuguese index as oil company Galp Energia rose about 20% after saying a field off Namibia could contain 10 billion barrels of oil. (EU)

Iran said on Friday that it had no plan to retaliate following an apparent Israeli drone attack within its borders, which in turn followed an Iranian missile and drone attack on Israel days before.

HAVEN OUTFLOWS

Bond yields, which climb when prices fall, were generally heading back toward multi-month highs.

The yield on benchmark U.S. 10-year notes fell 0.2 basis points to 4.613%, from 4.615% late on Friday.

The 30-year bond yield rose 0.6 basis points to 4.7168% from 4.711% late on Friday.

The two-year note yield, which typically moves in step with interest rate expectations, rose 0.2 basis points to 4.9713%, from 4.969% late on Friday.[US/]

In Europe, the benchmark Bund yield retreated from a five-month high as investors shifted their focus to European Central Bank policy. [GVD/EUR]

{{2126|The dodollar index, which measures the currency against six major peers, gained 0.03% at 106.13, as the euro reversed earlier gains to ease 0.01% at $1.0653.

"As long as there is this uncertainty about the cutting cycle particularly in the U.S, it's interesting for investors to be in dollar longs because of its dual status as a high-yielding currency and also a defensive currency," said Yvan Berthoux, FX strategist at UBS.

© Reuters. A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 5, 2024. REUTERS/Andrew Kelly/File Photo

Crude oil fell as traders put the focus back on fundamentals with a rise in U.S. stockpiles as the backdrop. Brent crude futures settled at $87.00 a barrel, down 29 cents, or 0.33%. U.S. West Texas Intermediate crude finished down 29 cents, or 0.35%, at $82.85 a barrel.

U.S. gold futures settled 2.8% lower at $2,346.4.

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