Equities slip, oil surges on Middle East conflict

Equities ended the week with a bang Friday after the jobs report for September managed to combine surprisingly strong job gains and moderate wage inflation.  This Goldilocks combination helped the S&P 500 Index break a four-week losing streak and the Nasdaq Composite rise to its highest close in more than two weeks.  The S&P 500 Index rose 1.2% and gained 0.5% for the week, the Dow Jones Industrial Average was up 0.9% but was down 0.3% for the week, and the Nasdaq Composite was up 1.6% and gained 1.6% for the week.  Energy shares were among the market’s strongest sectors behind a rebound in crude oil futures, though oil prices still ended down more than 8% for the week.  Technology and industrial shares were also strong.  European equity markets also gained on Friday, with the German DAX and Euro Stoxx 50 index rising by 1.1% each.  Leading the Friday gains were tech, retailers, and bank shares, all of which rose by more than 1%. 

Summary for 09.10.2023 

• Asian equity markets were mixed this morning as investors monitored rising geopolitical tensions in the Middle East after Hamas’ surprise attack on Israel over the weekend.  Australian shares rose as geopolitical risks drove oil and gold prices higher, lifting the resource-heavy bourse.  Meanwhile, shares in mainland China fell as traders returned from the week-long Golden Week holiday.  Elsewhere, morning trade in Hong Kong was suspended due to a typhoon, while markets in South Korea and Japan were shut for national holidays.  
• European equities are posed to inch lower as oil soared and US equity futures slumped on Middle East tensions. 
• Oil surged as much as 5% after the broadest and bloodiest attack on Israel in decades threatened to inflame tensions in the Middle East, the source of around a third of the world’s crude.  The latest events in Israel don’t pose an immediate threat to oil flows, but there’s a risk the conflict could spiral into a more devastating proxy war, embroiling the US and Iran. 
• The combined death toll from Hamas attack on southern Israel has climbed to more than 1,100 as fighting entered a third day.  The US said it was sending warships to the region.  Meanwhile, Iranian security officials helped Hamas plan its attack on Israel in a series of meetings over months, the Wall Street reported, citing unnamed senior members of Hamas and Hezbollah. 
• Spending and travel over China’s Golden Week holiday undershot official expectations for growth, adding pressure on policymakers to be more aggressive with stimulus.  The nation recorded some 826 million domestic trips over the eight-day holiday, bringing in the equivalent of $103 billion.  While much higher than 2022 – when the country was still largely contending with some of the world’s strictest pandemic controls – the figures fell short of government estimates. 
• The Labour Department reported that last Friday that the US economy added 336,000 nonfarm payrolls in September, the biggest jump since January and nearly double what analysts were expecting.  However, average hourly earnings rose just 0.2% in September, slower than the 0.3% increase analysts were expecting.  Meanwhile, the unemployment rate remained unchanged at 3.8%. 
• Metro Bank has clinched a £925 million financing package, a deal that will impose a 40% haircut on some bondholders and see Colombian financier Jaime Gilinski take a controlling interest.  The agreement buys the British retail and commercial bank some much-needed breathing space after a tumultuous week that saw its share price whipsaw and EY approach a number of lenders to submit offers. 
• Tesla sold 74,073 China-made electric vehicles in September, a 10.9% decrease from a year earlier, showed data from the China Passenger Car Association on Sunday.  In contract, Chinese rival BYD saw passenger vehicle deliveries grow 42.8% to 286,903 last month, from 200,973 in September last year. 
• Bristol-Myers Squibb is set to acquire cancer drugmaker Mirati Therapeutics for $58 per share in cash, representing $4.8 billion equity value.  Bristol-Myers Squibb will finance the transaction with a combination of cash and debt.  Mirati’s shares surged more than 40% last Friday following a Bloomberg report that Sanofi was looking at a deal for the biotech company. 
• Citigroup said on Monday it had agreed to sell its China consumer wealth portfolio, including clients, assets under management and deposits, to Asia-focused HSBC Holdings plc.  The deal covers total deposits and investment AUMs of about $3.6 billion and is expected to close in the first half of 2024. 
• Pioneer Natural Resources jumped nearly 11% on Friday after The Wall Street Journal reported Exxon Mobil Corp. was close to a deal to acquire Pioneer for about $60 billion.  Exxon shares fell 1.2%. 
• Shares of Philips plunged by almost 8% on Friday after the US Food and Drug Administration (FDA) expressed doubts about the adequacy of the testing data for their recalled devices.  As a result, the FDA has instructed Philips to carry out further risk testing. 
• Third-quarter earnings season will move to centre-stage this week.  Companies expected to report results include Delta Airlines, Domino’s Pizza, PepsiCo, United Health Group, and Walgreens Boots Alliance.  Next Friday also features several large banks, with Citigroup, JPMorgan Chase, PNC Financial Services, and Wells Fargo expected to report results. 

• On the macroeconomic front, attention in the US will be on the inflation report, FOMC meeting minutes, speeches by Federal Reserve officials, wholesale price data, and the Michigan Consumer Confidence Index.  International focus will be on inflation rates in China, Mexico, India, Brasil and Russia.  Additionally, China will release its trade balance, PPI inflation, and new yuan loans data, the UK will provide monthly GDP figures, while Germany will share insights into its industrial production.