Equities shake off Israel-Gaza conflict fears and focus on Fed instead

US equities finished higher on Monday, recovering from earlier concerns about the Israel-Hamas conflict, as investors refocused on this week’s inflation updates and the start of third-quarter earnings season. The S&P 500 Index and the Nasdaq Composite both rose to two-week highs, advancing by 0.6% and 0.4%, respectively. Elsewhere, European equity markets fell yesterday, with the German DAX down 0.7% and the Euro Stoxx 50 Index down 0.8%. Travel and leisure shares declined nearly 2.5% and retail shares went down almost 2%. 

Summary for 10.10.2023 

• Asian equity markets mostly rose this morning, tracking gains on Wall Street overnight as investors shrugged off pressures from the Israel-Hamas war. Growing expectations that the US Federal Reserve will not raise interest rates in November also lifted sentiment. Shares in Australia, Japan, South Korea and Hong Kong advanced, while mainland China equities were sluggish. 
• European shares are set to rally and US equity futures were little changed overnight after Fed remarks boosted investor sentiment. 
• Oil prices dipped on Tuesday after rallying more than 4% in the previous session, in the absence of credible estimates on how many barrels of oil produced, traded or shipped out of the Middle East would be stranded by latest tensions in the region. Meanwhile, Reuters reported that Venezuela and the US have made progress in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions. 
• Federal Reserve Vice Chairman Philip Jefferson said yesterday that officials need to “proceed carefully” to balance the risk of tightening too much, increasing speculations that the Fed will refrain from lifting rates this year. 
• Chinese developer Country Garden ramped up warnings that it’s set for its first-ever default and hired advisers, the strongest indications yet the company is headed for a restructuring that would be one of the nation’s biggest. The builder “expects that it will not be able to meet all of its offshore payment obligations when due or within the relevant grace periods, including but nt limited to those under the US dollar notes issued by the company,” it said in a filing Tuesday. 
• The fighting in the Middle East lifted defense shares on Monday, with L3Harris Technologies jumping 10%, while Lockheed Martin rose nearly 9% and General Dynamics advanced more than 8%. 
• Walt Disney rose 2% yesterday after The Wall Street Journal reported activist investor Nelson Peltz’s Trian Fund Management had increased its stake in the company and could seek multiple board seats, including for Peltz. 
• Arm Holdings shares rose 0.3% in regular trading Monday and a further 1.2% in extended hours after JPMorgan initiated coverage of the chip designer with an “overweight” rating, citing the company’s potential expansion into automobiles. 
• Oracle also rose by 0.3% after Evercore ISI upgraded the share to “outperform” from “in line,” saying that the software and cloud computing company is positioned to deliver more consistent revenue and earnings growth. 
• Spotify Technology fell 2.5% yesterday after Redburn Atlantic downgraded the music-streaming services’ shares to “neutral” from “buy,” citing concern the company’s new audiobook offering will be “gross margin dilutive.”