Oil prices ease on possible new Middle East ceasefire talks

NEW YORK – Oil prices eased about 1% in volatile trade on Thursday on reports the US and Israel will try to restart talks on a possible ceasefire in Gaza.

Brent futures LCOc1 settled 58 cents, or 0.8%, lower at $74.38 a barrel, while US West Texas Intermediate crude (WTI) CLc1 slipped 58 cents, or 0.8%, to end at $70.19.

Earlier in the session, both benchmarks traded up over $1 a barrel on concerns the ongoing conflict in the Middle East could result in oil supply disruptions and from uncertainty ahead of the US presidential election on Nov. 5.

“(The) energy complex continues to zig and zag as Middle East risk premium expands and contracts almost daily,” analysts at energy advisory firm Ritterbusch and Associates said in a note.

After Iran fired missiles at Israel on Oct. 1, Brent crude surged about 8% during the week ended Oct. 4 on worries Israel would attack Iran’s oil infrastructure. It fell about 8% in the week ended Oct. 18 on reports Israel would not hit energy infrastructure, easing fears of supply disruptions.

Iran is a member of the Organization of the Petroleum Exporting Countries and produced about 4 million barrels per day (bpd) of oil in 2023, US Energy Information Administration data showed.

Iran was on track to export around 1.5 million bpd in 2024, up from an estimated 1.4 million bpd in 2023, according to analysts and US government reports.

Iran backs several groups fighting Israel, including Hezbollah in Lebanon, Hamas in Gaza and the Houthis in Yemen.

With the fast-approaching U.S. presidential election, which could alter US Middle East and oil policy, President Joe Biden’s administration continued to push for peace between Israel and Hezbollah and Hamas.

“(Former President Donald) Trump is leading over (Vice President Kamala) Harris based on current data from betting markets and Trump has proposed making the U.S. a major oil supplier,” said OANDA senior market analyst Kelvin Wong, adding that such a move could depress prices.

While betting markets put Trump ahead, other polls show the result is too close to call.

Demand worries

In Europe, Euro zone business activity stalled again this month, remaining in contractionary territory as demand from both home and abroad fell despite firms barely increasing their prices, a survey showed on Thursday.

In the UK, optimism among British firms has sunk, according to two surveys published on Thursday, six days before finance minister Rachel Reeves tries to chart a way between raising taxes and boosting growth in the new government’s first budget.

In the U.S., new applications for U.S. unemployment aid unexpectedly fell last week, but the number of people collecting benefits in mid-October was the highest in nearly three years, indicating it was becoming harder for those losing jobs to land new positions.

(Reporting by Scott DiSavino in New York, Paul Carsten in London, Arathy Somasekhar in Houston and Trixie Yap in Singapore; Editing by David Goodman, Elaine Hardcastle and Susan Fenton)

BRICS leaders tout joint finance, trade projects at Russian summit

KAZAN, Russia – Leaders of the nations in the BRICS grouping, which accounts for 37% of global economic output, predicted its influence would grow as they met in Russia on Tuesday, outlining common projects ranging from a grain exchange to a cross-border payments system.

Russia’s President Vladimir Putin, who has sought support from BRICS leaders amid his standoff with the West over the war in Ukraine, said that BRICS’ average economic growth in 2024/25 would be 3.8%, compared to global growth of 3.2-3.3%.

“The trend for the BRICS’ leading role in the global economy will only strengthen,” Putin said, citing population growth, urbanization, capital accumulation, and productivity growth as key factors.

The joint communique of the summit, called the Kazan Declaration, attacked unilateral sanctions imposed on some of the group’s members, including Russia and Iran, saying that they harm the poorest people in targeted states.

“Therefore, we call for their elimination,” the Kazan Declaration said.

Russia, the world’s biggest wheat exporter, proposed the creation of a BRICS grain exchange which could later be expanded to trade other major commodities such as oil, gas and metals. The Kazan Declaration welcomed the initiative.

“BRICS countries are among the world’s largest producers of grains, legumes, and oilseeds. In this regard, we proposed opening a BRICS grain exchange,” Putin told the leaders.

Cross border payments

He added that the exchange “will contribute to the formation of fair and predictable price indicators for products and raw materials, considering its special role in ensuring food security”.

“The implementation of this initiative will help protect national markets from negative external interference, speculation, and attempts to create an artificial food shortage,” Putin said.

Kremlin spokesman Dmitry Peskov, asked why the declaration paid relatively little attention to the Ukraine conflict, told Russian radio that Ukraine was not the central issue for BRICS.

“This is an important question for Russia’s agenda but it is far from being the central issue for BRICS. And to the extent that it should figure on the BRICS agenda, this was reflected.”

Ukraine’s Foreign Ministry said the declaration showed Russia had been unable to impose on other participants its view of the war in Ukraine.

Other leaders backed the creation of a common cross-border payments system, which would help BRICS countries trade with each other, bypassing the dollar-dominated global financial system.

Brazilian President Luiz Inacio Lula da Silva, who took part in the BRICS summit via video conference after a head injury over the weekend, said that it is time for the BRICS nations to create alternative payment methods.

He added that the group’s New Development Bank (NDB) was designed as an alternative to what he called failing Bretton Woods institutions such as the International Monetary Fund (IMF).

Local currencies

India’s Prime Minister Narendra Modi said that he welcomed the steps for financial integration of BRICS countries while China’s President Xi Jinping urged BRICS countries to deepen financial and economic cooperation.

The Kazan Declaration called for a feasibility study on the other Russian initiatives, a BRICS Clear depositary and securities trade settlement system and a common reinsurance company.

In his speech, Putin also called for the creation of a BRICS investment platform, which will facilitate mutual investment between BRICS countries and could also be used for investment in other countries in the Global South.

Contrary to earlier statements from senior Russian officials on the need to find an alternative to the International Monetary Fund (IMF), the Kazan Declaration enhanced the role of the IMF, stressing the need for further reforms.

The declaration did not mention global dollar dominance, an issue that was often raised during the Russian presidency, nor a BRICS single currency and the use of cryptocurrencies, mentioned by Russia as a way to protect trade from Western sanctions.

“We welcome the use of local currencies in financial transactions between BRICS countries and their trading partners,” the Kazan Declaration said.

(Reporting by Vladimir Soldatkin in Kazan, Gleb Bryanski in Moscow; Editing by Alison Williams, Emelia Sithole-Matarise, Philippa Fletcher, Alexandra Hudson and Daniel Wallis)

South Korea’s economy barely grows in third quarter, missing expectations

SEOUL – South Korea’s economy barely grew in the third quarter, missing market expectations, as consumer spending rebounded but exports fell.

In the July-September quarter, gross domestic product expanded 0.1% from a quarter earlier on a seasonally adjusted basis, according to the Bank of Korea’s advance estimates released on Thursday.

That was just enough for Asia’s fourth-largest economy to avoid a recession, commonly defined as two consecutive quarters of contraction, after the economy contracted 0.2% in the second quarter.

The growth rate was far weaker than an increase of 0.5% tipped in a Reuters poll of economists and expected by the central bank in its quarterly forecasts provided in August.

Private consumption rose 0.5%, after falling 0.2% a quarter earlier. Construction investment dropped 2.8%, while corporate investment jumped 6.9%.

Exports, down 0.4%, fell for the first time since the final quarter of 2022, while imports rose 1.5%, bringing a net negative contribution.

South Korea’s central bank this month lowered interest rates for the first time since mid-2020 and flagged there was room for more reductions though it said the timing of any further easing would be carefully examined.

On an annual basis, the economy grew 1.5%, weaker than the previous quarter’s 2.3% and economists’ expectations of 2.0%. It was the slowest pace since the third quarter of 2023.

(Reporting by Jihoon Lee; Editing by Tom Hogue and Jamie Freed)

US yields hit three-month high on election hedging

NEW YORK – US Treasury yields hit a three-month high on Tuesday as hedging before the November 5 US elections and expectations for a less dovish Federal Reserve dampened demand for the US government debt.

Shifting momentum towards a more likely Donald Trump presidency has weighed on bonds, with Trump policies including tariffs and restrictions on undocumented immigration expected to increase inflation.

A sharp sell-off in bonds on Monday “was partly driven by the prediction markets’ pricing in higher odds of a Trump victory,” said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York.

Betting site Polymarket on Tuesday shows Trump as having 66% odds of winning the presidency, compared to 34% for Kamala Harris.

“Tariffs and crackdowns on immigration would be stagflationary shocks,” Goldberg said, adding that its “very likely you’ll see the inflationary impact first because it feeds through the data much faster.”

The US budget deficit is also expected to worsen under a presidency by either Trump or Harris, which could lead to increases in Treasury supply next year.

Benchmark 10-year note yields were last up 2.2 basis points at 4.204% and earlier reached 4.222%, the highest since July 26.

Two-year note yields rose 1 basis point to 4.035%.

The yield curve between two-year and 10-year notes steepened slightly to 16.7 basis points.

“The market is trading to a large extent now the Trump trade and that’s why I think there’s a danger we’re going to continue to push to higher yields,” said Tom Fitzpatrick, head of global market insights at R.J. O’Brien.

A strong jobs report for October next week could also add to yield increases and possibly lead traders to rethink whether the Fed will cut rates next month.

“I don’t think it’s inconceivable that the Fed actually reconsiders moving in November, it’s definitely possible the market thinks it,” said Fitzpatrick. “A squeeze up in yields seems like a real danger here.”

A much stronger-than-expected employment report for September has led investors to price out the probability that the US central bank will make larger-than-normal interest rate cuts. The Fed cut rates by 50 basis points last month.

Traders are now pricing in 42 basis points of cuts by year-end, indicating a less than 100% chance that the Fed will make 25 basis point cuts at each of its coming two meetings.

The Treasury Department will sell USD 13 billion in 20-year bonds on Wednesday and USD 24 billion in five-year Treasury Inflation-Protected Securities on Thursday.

(Reporting By Karen Brettell, Editing by Nick Zieminski)

Dollar hits to 2-1/2-month peak as US rates, election eyed

NEW YORK – The US dollar rose to a fresh 2-1/2-month high on Tuesday, continuing its recent ascent on expectations the Federal Reserve will temper its interest rate cut path, while investors positioned ahead of an apparently tight US presidential election.

The greenback has risen for three straight weeks and is on track for its 15th gain in 17 sessions as a run of positive economic data has diminished expectations about the size and speed of rate cuts from the Fed, which has pushed US Treasury yields higher.

The yield on the benchmark 10-year US Treasury note reached 4.222% on Tuesday, its highest since July 26.

Markets are pricing in an 89.6% chance for a cut of 25 basis points at the Fed’s November meeting, with a 10.4% chance of the central bank holding rates steady, according to CME’s FedWatch Tool. The market was completely pricing in a cut of at least 25 bps a month ago, with a 50.4% chance of a 50 bps cut.

“If the data had not been strong in the US, certainly had not been strong relative to the rest of the world, there would not have been this divergence between what the Fed is moving towards and what the other central banks are moving towards, which is opposite directions, at least tonally, rhetorically, and that is what is driving the dollar higher,” said Thierry Wizman, global FX and rates strategist at Macquarie in New York.

The dollar index =USD, which measures the greenback against a basket of currencies, including the yen and the euro, rose 0.12% to 104.08, after hitting 104.10, its highest since Aug. 2. The index is up about 3.3% on the month, on pace for its strongest month since April 2022.

Sterling edged down 0.04% to USD 1.2979.

The upcoming US presidential election also continues to drive currency moves, as market expectations have grown in recent days for a victory by Republican presidential candidate and former President Donald Trump, which would likely bring about inflationary policies like tariffs.

“As Trump’s prospects have done better in winning the election, the market starts to price in more inflation in the US too, because his core policy agenda is associated with more inflation, at least certainly more than you would associate with (Democratic presidential candidate Kamala) Harris’ core policy agenda,” said Wizman.

The euro EUR= dipped 0.15% to USD 1.0798. A flurry of European Central Bank policymakers spoke on Tuesday to warn about the risk of inflation falling below the central bank’s 2% target, signaling a change in their focus after years of excessive price growth.

Against the Japanese yen, the dollar strengthened 0.17% to 151.08 after climbing to 151.19, its highest since July 31.

The Bank of Japan is carefully looking at the upside risks from rising import prices as the yen weakens, Executive Director Takeshi Kato was quoted as saying by Jiji Press on Tuesday.

Japan is set to conduct a general election on Oct. 27. Several recent opinion polls have shown the possibility of the ruling coalition losing its majority in parliament, which could cost Premier Shigeru Ishiba his job or force his Liberal Democratic Party to look for an additional coalition partner to stay in power, raising concerns the Bank of Japan could face complications as it attempts to slowly wean the nation off decades of monetary stimulus.

In cryptocurrencies, bitcoin shed 0.49% to USD 67,392.55.

(Reporting by Chuck Mikolajczak; Editing by Ros Russell and Jonathan Oatis)

Wall Street closes little changed while investors digest yields, earnings

US stocks ended little changed on Tuesday, but the Nasdaq eked out a modest gain while investors kept an eye on Treasuries yields and awaited more earnings to assess the health of American companies.

“The last couple of days, the market has been trying to digest the move in treasuries as you’ve had a pretty big backup in yields,” Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions.

In a choppy session, the Dow Jones Industrial Average fell 6.71 points, or 0.02%, to 42,924.89, the S&P 500 lost 2.78 points, or 0.05%, to 5,851.20 and the Nasdaq Composite gained 33.12 points, or 0.18%, to 18,573.13.

Almost half of the S&P sectors were in the positive territory, with the consumer staple leading the pack up 0.92%.

The benchmark 10-year note yields earlier reached 4.222%, the highest since July 26, as investors reassessed expectations for the Federal Reserve’s policy trajectory. Yields dialed back a bit during the trading session.

“The big story overall is the rates back up and the concerns that the Federal Reserve made a policy error by moving too aggressively in September. That’s feeding through to a rate sell-off on a global basis,” said Michael Green, portfolio manager at Simplify Asset Management.

On the corporate front, GE Aerospace slumped 9% despite raising its profit forecast for 2024, as persistent supply constraints impacted its revenue. It pulled the broader Industrials index lower 1.19%.

Overall the broader technology sector was up 0.15%. Microsoft MSFT.O rose 2.08%.

“During the earnings season, you often get this kind of choppiness, but there’s also increased uncertainty relative to the interest rate direction,” said Chuck Carlson, CEO at Horizon Investment Services.

The next few weeks are likely to be volatile for equity markets, as investors scrutinize company earnings, fresh economic data and results of the US election, followed by a central bank meeting.

Traders are pricing in a 89.6% chance of a 25-basis-point interest-rate cut in November, according to CME’s FedWatch.

Among other earnings, Verizon fell 5.03% as the telecom giant missed estimates for third-quarter revenue.

3M slipped 2.31%, reversing its premarket gains, despite raising the low end of its full-year adjusted profit forecast.

Meanwhile, General Motors leaped 9.81% after the legacy carmaker’s third-quarter results beat Wall Street estimates, while Lockheed Martin dipped 6.12% after results.

Rate-sensitive homebuilding stocks slipped, with the PHLX Housing index dropping 3.05%, dragged down by a 7.24% fall in shares of PulteGroup despite the company beating profit and revenue estimates.

“The earnings themselves have been pretty good, it’s just the companies highly sensitive to interest rates are probably going to find a bit of headwind right now as investors sort out the whole interest rate story,” Carlson said.

Baker Hughes and Texas Instruments are scheduled to report earnings after the bell.

Declining issues outnumbered advancers by a 1.37-to-1 ratio on the NYSE. There were 186 new highs and 58 new lows on the NYSE.

The S&P 500 posted 15 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 72 new highs and 61 new lows.

Volume on US exchanges was 11.45 billion shares, compared with the 11.28 billion average for the full session over the last 20 trading days.

(Reporting by Lisa Mattackal and Purvi Agarwal in Bengaluru; Editing by Pooja Desai, Shounak Dasgupta, Maju Samuel, and Aurora Ellis)

US yield spike spooks investors

If the prospect of a soft landing for the US economy had boosted investor sentiment and global risk appetite recently, it is giving way to a deepening sense of caution as investors grapple with spiking US bond yields and a stronger dollar.

It’s not that yields and the dollar are rising solely on the back of increased optimism about the US growth outlook. Worries about Washington’s huge spending and deficits, and the upcoming US election, are also on the rise.

So much so, that the US “term premium” – the extra compensation investors demand for lending to the government over the long term instead of rolling over shorter-term loans – is back. It is the highest in a year.

Add to that the ongoing doubt surrounding China’s economic outlook and the effectiveness of Beijing’s raft of support measures, and Asian investors’ glass right now is looking half empty rather than half full.

If Wall Street is beginning to feel a little heat from the spike in yields, Asian and emerging markets definitely are. Asian stocks are now down five of the last six sessions.

The 10-year US Treasury yield broke above 4.20% on Tuesday for the first time in three months, and the dollar index also climbed to highs last seen on Aug. 2.

If it’s rate and yield differentials fueling the dollar’s gains, the path of least resistance is against the ultra-low yielding Japanese yen. The dollar on Tuesday rose above 151.00 yen for the first time in three months, and the yen is back to being the worst-performing main Asian currency this year.

The weaker yen isn’t offering much support for Japanese equities, though. Foreigners have been buyers in recent weeks but the Nikkei is at a three-week low, suggesting domestic investors are putting their cash overseas.

The Asian calendar on Wednesday is light, with only inflation from Singapore and industrial production figures from Taiwan on deck, leaving investors to focus on global market-moving drivers.

They include the BRICS summit in Kazan, Russia, and IMF and World Bank annual meetings in Washington.

Investors can expect headlines from several policymakers in Washington to hit the tape on Wednesday, including from European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey, Bank of Japan Governor Kazuo Ueda, and Reserve Bank of New Zealand Governor Adrian Orr.

The International Monetary Fund on Tuesday published its World Economic Outlook, in which it cut its GDP forecasts for China and Japan. The change in Japan’s outlook, to 0.3% growth from 0.7%, was the biggest downgrade of all major economies, and second only to Mexico’s 0.7 percentage point fall.

Here are key developments that could provide more direction to markets on Wednesday:

– Singapore inflation (September)

– Taiwan industrial production

– BOJ Governor Ueda speaks in Washington

(Reporting by Jamie McGeever; Editing by Bill Berkrot)

Investors flee thematic ETFs as stock benchmarks soar

Investors are leaving exchange-traded funds tied to specific themes, such as artificial intelligence and video gaming, as they flock to funds linked to broad stock-market benchmarks that are hitting record highs.

The run for the exits, however, may slow if the broader market stumbles.

While flows in equity ETFs overall continue to climb, thematic ETFs, which invest in companies tied to everything from solar energy to robotics and millennial consumers, are on pace for their third-consecutive year of net outflows, according to financial data and analysis company Morningstar.

The category, which has total assets of USD 108 billion, has lost USD 5.8 billion in investor capital this year, greater outflows than the USD 4.8 billion for all of 2023, according to Morningstar.

“It’s winter for thematic ETFs right now,” said Taylor Krystkowiak, investment strategist at Themes ETFs, an asset-management firm focused on this category.

Returns from broad market indexes are setting a higher bar for thematic funds this year. The S&P 500, the benchmark for the US stock market, has climbed over 22% this year, propelled by gains from influential stocks including Nvidia and Meta Platforms.

The five largest ETFs tracking the S&P 500 and the Nasdaq 100, another equity benchmark, have seen inflows of USD 170 billion this year. The SPDR S&P 500 ETF Trust on Thursday became the first ETF to reach USD 600 billion in assets.

“It’s not that people don’t like the idea of themes any longer, but that a bull market dominated by a handful of megacaps makes it hard for any theme to stand out,” said Aniket Ullal, ETF analyst at CFRA, a market research firm.

BAD TIMING

Part of the challenge, said Bryan Armour, ETF analyst at Morningstar, is the nature of thematic investing itself.

Investors often mistime investing in themes, according to a Morningstar study that found investors in thematic ETFs missed out on two-thirds of their returns in a five-year period.

“You have to pick the right theme, then be sure that the fund has picked the stocks that will benefit most from that theme, and then be right about the timing of when you buy the fund,” Armour said. “Getting that trifecta right is tough.”

Even some AI-themed ETFs with outsized exposure to market-darling Nvidia have struggled to retain assets. The Global X Robotics & Artificial Intelligence ETF has seen net outflows of USD 89 million in the last 12 months, according to the firm. Despite the fund having nearly 13% of its portfolio in the AI chipmaker – almost double the S&P 500 weighting – it has performed only in line with the index, with both up about 39% in the past year.

“We still have longer-term conviction in themes,” said Arelis Agosto, head of thematics at Global X, which has seen outflows in 19 of its 31 thematic funds over the last 12 months. “We take a long-term view.”

Cathie Wood’s ARK Innovation ETF, which invests in companies promising “disruptive innovation,” has seen USD 2.6 billion in outflows in 2024, the most of the thematic ETFs, according to Morningstar. The fund is down more than 9% this year.

The fact that thematic funds tend to levy higher fees can diminish their appeal. Thematic ETFs’ fees average 0.62% of money invested while the average ETF fee is 0.49%. Investors pay 0.09% to own the State Street S&P 500 ETF and 0.03% for BlackRock’s iShares Core S&P 500 ETF, according to Morningstar.

The number of thematic launches dropped to 13 this year from 39 in 2023, while closures of thematic funds in 2024 have already topped 2023’s total, with 36 compared to 32, according to Morningstar.

Themes ETFs is bucking that trend, having launched 18 products since December, including a Transatlantic Defense ETF, which invests in defense companies based in NATO member states, and a European Luxury ETF, with holdings in Ferrari NV and Watches of Switzerland Group PLC.

“I think that when S&P 500 megacaps stop delivering the way they do today, the focus will shift back to thematic ETFs,” Krystkowiak said.

(Reporting by Suzanne McGee; Editing by Lewis Krauskopf and Rod Nickel)

Global markets might be underestimating geopolitical risks, IMF says

WASHINGTON – Near-term global financial risks are contained, but monetary policy easing could fuel asset price bubbles and markets might be underestimating risks posed by military conflicts and impending elections, the International Monetary Fund said on Tuesday.

In its semi-annual Global Financial Stability Report, the IMF warned that a “widening disconnect” between escalated geopolitical uncertainty and low market volatility increases the chance of a market shock similar to the gyrations seen in August when a Bank of Japan interest rate hike sparked massive de-leveraging.

Buoyant credit and equity markets also seem undeterred by a slowdown in earnings growth and the continued deterioration in more fragile segments of the corporate and commercial real estate sectors, the Washington-based multilateral lender said.

It also flagged that while monetary easing by most other major central banks was creating “accommodative” financial conditions, interest rate cuts could stoke lofty asset valuations, a global rise in private and government debt, and non-bank leverage.

“These mounting vulnerabilities could amplify adverse shocks, which have become more probable due to elevated economic and geopolitical uncertainty amid ongoing military conflicts and the uncertain future policies of newly elected governments,” it wrote.

The report was released as global finance chiefs gather in Washington for the IMF and World Bank annual meetings during one of the most geopolitically and economically uncertain periods for the world in decades.

In addition to the war in Ukraine and an escalating conflict in the Middle East, half the world’s population has elected or will elect new governments in 2024, including the US, the IMF noted. In many cases those new leaders’ policy plans are unclear, but will carry significant economic consequences.

In particular, economists and Wall Street executives have raised concerns that Republican presidential candidate Donald Trump’s planned import tariff hikes could reignite inflation, while his promised tax cuts could widen the US deficit.

The IMF urged central banks to communicate clearly and cut rates gradually, and said regulators should closely monitor corporate debt and commercial real estate, and ensure robust bank supervision. It also said regulators should enhance reporting requirements for non-bank financial institutions like hedge funds and private equity firms, which are playing a bigger role in financial markets. Regulators, however, generally have less visibility on such firms’ activities and leverage levels compared with traditional lenders, the report said.

The rise of artificial intelligence is also featured in the report. The IMF noted that increased adoption of AI by financial firms could boost speed and efficiency, but also volatility.

Furthermore, increased reliance on a handful of AI service providers poses other operational risks, and could create a challenge for regulators trying to police what is generally seen as a more opaque technology, the report said.

(Reporting by Pete Schroeder; editing by Michelle Price and Paul Simao)

GLOBAL MARKETS: Stocks lose ground amid cautious trading with gold at record high

NEW YORK – Global equity markets lost ground on Monday as traders remained cautious amid rising geopolitical tensions and uncertainty over the US presidential election, helping to push gold futures to new highs.

The Israeli military is continuing its attacks against Lebanon’s Hezbollah militant group, with hundreds of Beirut residents fleeing their homes late on Sunday as explosions rocked the Lebanese capital.

Gold prices surged to a record high on Monday and were little changed at $2,719.33 an ounce. US gold futures settled 0.3% higher at USD 2,738.9.

The benchmark S&P 500 and Dow finished lower, with defensive stocks including real estate and healthcare among the leading drags. The Nasdaq closed slightly stronger, with Nvidia finishing at a record high, ahead of a busy week for corporate earnings.

The Dow Jones Industrial Average fell 0.80%, to 42,931.60, the S&P 500 fell 0.18% to 5,853.98 and the Nasdaq Composite rose 0.27% to 18,540.01.

The European shares index lost 0.66%, while MSCI’s gauge of stocks across the globe fell 0.37%. Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.5% lower.

“There’s just tension around the earning season kicking off in earnest and then, of course, the elections two weeks away even though we haven’t had the typical anxiety over elections that we normally see in September and October,” said James St. Aubin, chief investment officer at Ocean Park Asset Management in Santa Monica, California.

Oil prices settled up nearly 2% after a more than 7% drop last week. Brent crude futures settled up 1.68% at USD 74.29 a barrel, while US West Texas Intermediate crude futures were 1.94% higher at USD 70.56 a barrel.

Markets are pricing in a 89.3% chance for a cut of 25 basis points (bps) at the Fed’s November meeting, with an 10.7% chance of the central bank holding rates steady, according to CME’s FedWatch Tool. The yield on benchmark US 10-year notes rose 11.9 basis points to 4.194%.

The dollar climbed, buoyed by a rise in US bond yields. The euro was down 0.46% at USD 1.0815, while the pound weakened 0.51% to USD 1.2982. Against the Japanese yen, the dollar strengthened 0.86% to 150.79.

The European Central Bank (ECB) last week cut rates for the third time this year. Data on Monday showed German producer prices fell more than expected in September.

The dollar index, which tracks its performance against a basket of currencies including the yen and the euro, rose 0.49% to 103.97.

“Between the combination of escalating or still-high Middle East tensions, and we’re only a handful of days away from the (U.S. election), it could be that the market is getting nervous ahead of that and people are squaring some of their positions,” said Wasif Latif, president and chief investment officer at Sarmaya Partners.

(Reporting by Chibuike Oguh in New York; editing by Tomasz Janowski and Stephen Coates)

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