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Morning Bidding: Tension in the Middle East Spooks Markets
European stock markets got off to a rough start on Friday, with the futures index posting its biggest one-day drop in months, due to escalating tensions in the Middle East. Israeli Prime Minister of Agriculture Benjamin Netanyahu said that "whoever harms us or plans to harm us" will respond. Israel is preparing for possible repetitive attacks that could be triggered by a hypothetical Israeli air strike on the Iranian embassy on Monday.
Rae Wee's outlook for the day ahead in European and global markets
As a result of the escalating tensions in the Middle East, European stocks got off to a rough start on Friday, with the futures index posting its biggest one-day drop in months.
Israeli Prime Minister of Agriculture Benjamin Netanyahu said that Israel will hurt "whoever hurts us or plans to hurt us". Israel is preparing for possible repetitive attacks that could be triggered by a hypothetical air strike on the Iranian embassy on Monday.
That eclipsed Wall Street's late-rock plunge on Thursday, as Asian stocks went red and oil prices jumped.
Europe has not been spared either, with EURO STOXX 50 futures having fallen by more than 1.5% - a big drop in Asian time.
FTSE futures were also down by more than 1.4%.
The risk of a protracted Israeli-Hamas war - once overshadowed by cheers for global interest rate cuts - has once again come into focus. This has proved to be a "wild card" for central bankers as markets reassess the Fed's expectations for rate cuts this year.
Minneapolis Fed chief mat Neel Kashkari, a well-known hawk, even said that if inflation continues to stagnate, there may be no need to cut interest rates at all this year.
Brent futures prices above $90 per barrel may also be unfavorable for easing.
All this comes ahead of a key U.S. jobs report due later Friday that could determine the success or failure of the Fed's first rate cut in June, which appears to have turned into a cat-and-mouse game.
Surprise growth in U.S. manufacturing at the start of the week helped the dollar rise to more than four-month highs as traders reduced their bets that the Fed was about to enter an easing cycle, but a U.S. services survey released a few days later was disappointing.
Expectations for Friday's data are for an increase of 200,000 non-employment jobs in March, and there are tentative signs that labor market conditions in the world's largest economy are easing, albeit at a modest pace.
Key developments likely to affect Friday's market
- Eurozone retail sales (February)
- German import prices (February)
- The United Kingdom restarted auctions of 1-month, 3-month and 6-month government bonds.
- U.S. Non-Employment (March)
(Edited by Sam Holmes)
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