US Futures Fall Awaiting Israel’s Reaction in Nerves – Europe Market Wrap

US futures dipped, and Treasuries reversed some of the previous day’s gains, as rising Middle East tensions put markets on hold.

With traders waiting for Israel’s response to Iran’s missile barrage and Brent crude rising beyond $75 per barrel, geopolitical anxieties have supplanted central bank policy easing as the primary market driver. The escalation in the region prompted a flight to safety on Tuesday, sending the VIX to a crucial level that typically implies further market swings are ahead.

S&P 500 futures fell 0.2%, as Europe’s market benchmark lost earlier gains. 10-year Treasury yields rose three basis points to 3.76%, up from a low of 3.69% on Tuesday, when demand for safe haven assets fuelled desire for government bonds. The dollar remained flat.

Oil producers defied the major European index’s falls, with oil surging after Israel pledged to retaliate for Tehran’s ballistic missile attack. The sharp escalation of hostilities has raised worries of a Middle East-wide conflict.

Meanwhile, Chinese stocks traded in Hong Kong rose the most in nearly two years as Beijing joined other major cities in lifting home buying restrictions. The huge stimulus initiatives outlined by China’s authorities last week boosted local assets and helped elevate international markets.