Stocks rise on hope Middle East tensions can be contained
Goldman Sachs' profits boosted by recovery in dealmaking
Oil dips after 10% rally over last month
Gold ticks higher, but safe-havens not generally in demand
Graphic: World FX rates http://tmsnrt.rs/2egbfVh
Wall Street was set to start the week modestly higher while oil, the dollar and bond prices all dipped on Monday as investors kept Middle East concerns in check after Iran's weekend attacks on Israel.
Tehran's offensive involved more than 300 missiles and drones but having sold off sharply on Friday and with world powers urging restraint, market moves showed an element of relief.
Oil prices, which have risen 10% as conflict has spread over the past month, dropped 1% LCOc1 , Israel's shekel rose 1.3% ILS= and U.S. futures and the pan-European STOXX 600 .STOXX both climbed almost half a percent, albeit led by defence stocks .SXPARO .
Gold, which has been hitting record highs for weeks, rose 0.3% XAU= but the dollar .DXY and the ultra-safe government bonds that money managers often turn to when geopolitical tensions mount, were all lower.
Close Brothers Asset Management's Chief Investment Officer Robert Alster said the hope was that U.S. and Gulf diplomatic efforts would now prevent further escalation of the troubles.
"There is a general belief (among investors) that it isn't going to escalate," Alster said, highlighting that oil prices had not breached their September highs of $96 a barrel. "There has been a tit-for-tat and hopefully now we move on."
There is also another busy week of economic data and company earnings in store and the International Monetary Fund's spring meetings, which can steer the global narrative, get underway too.
One of those data points is U.S. retail sales later. The dollar index =USD , which measures the currency against a basket of six others, was steady at 105.92, just below Friday's 5-1/2 month high of 106.11.
It did though scale a 34-year high against the Japanese yen JPY=EBS on growing expectations that sticky inflation will keep U.S. interest rates higher for longer and that Tokyo has not rushed to intervene in FX markets yet.
WAIT AND SEE
Higher Wall Street futures were a relief after a heavy selloff on Friday that as well as the Middle East concerns had also been fuelled by dwindling Fed rate cut hopes and a round of disappointing bank earnings.
Goldman Sachs was looking to turn the tide though with its shares up 3% in pre-opening bell trading as a recovery in M&A deals and debt underwriting helped boost its profits nearly 30%.
Friday's falls had consigned MSCI's main world share index to its worst day in six months though and MSCI's broadest index of Asia-Pacific shares .MIAPJ0000PUS had fallen back overnight though as the sense of nervousness swept over bourses there.
Japan's Nikkei .N225 and Hong Kong's Hang Seng .HSI both slid as much as 1%, while Australian stocks (xjo) lost nearly 0.5%.
The threat of open warfare erupting between Middle East foes Iran and Israel and dragging in the United States has left the region on tenterhooks. U.S. President Joe Biden warned Israeli Prime Minister Benjamin Netanyahu the U.S. will not take part in a counter-offensive against Iran.
Israel said "the campaign is not over yet".
Oil prices showed traders had largely priced in a retaliatory attack from Iran, which could lead to more strictly enforced sanctions on Iranian oil. That saw Brent crude futures LCOc1 peaking at $92.18 a barrel last week, the highest level since October.
Monday's 1% drop left Brent back below $90 per barrel, U.S. West Texas Intermediate CLc1 crude futures at just under $85 a barrel while gold was a touch higher at $2,351 an ounce.
"It is something of a wait and see now for markets as we wait to see how Israel reacts and how Iran's proxies respond," said UBS Global Wealth Management multi-asset strategist Kiran Ganesh said.
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