Pre-Market Pulse 10th October – Equities edge higher despite geopolitical woes

Overnight – Equities edge higher despite geopolitical woes

Equites edged higher as investors bought the early-day weakness after weighing up a more cautious tone rate hike from Federal Reserve officials and rising geopolitical tensions amid fears the Israel-Hamas conflict.

Fed Vice Chair Philip Jefferson and Dallas Fed president Lorie Logan struck a caution tone on the need for further rate hikes, indicating that the recent climb in Treasury yields, which has tightened financial conditions, would help the Fed in its battle against inflation. Vice chair Jefferson commented “We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive,” while Logan said “there may be less need to raise the fed funds rate following a rise in long-term interest rates”. 

Following the surprise Hamas’ attack on Israel, and subsequent declaration of war by Israel, geopolitical tensions in the Middle-East dominated investor attention and briefly kept a lid on their appetite for risk.

The escalating conflict comes just as optimism was building that the U.S. was inching closer to brokering a deal that would normalize ties between Saudi Arabia and Israel, potentially paving the way to the end of the Arab-Israeli conflict.   

There was a move higher in energy stocks as Israel shut down natural gas production in the Mediterranean. Major player, Chevron lifted 3%, while Haliburton and Marathon Oil were the biggest gainers in the sector, rallying around 7%