Middle East tensions continue in global markets

As traces of geopolitical tension continue in global markets, gold and oil prices are rising. Fed Chair Jerome Powell made statements regarding the economic outlook at the Economic Club of New York. Powell stated that additional evidence of a strong economy may necessitate an interest rate hike. Powell also said that the Fed is proceeding 'cautiously' in its interest rate policy. Following Fed Chair Powell's speech, 2-year US bond yields fell. While tensions in the Middle East continue to affect global markets; as of 08:03 GMT, stocks are falling while gold and oil are rising. The MSCI Asia Pacific Index is heading for its biggest weekly decline in two months. Chinese stocks have reduced their previous losses as policymakers pumped record amounts of short-term cash into the financial system. The China CSI 300 is down 0.22 percent. The Japanese and Hong Kong stock exchanges are also falling slightly. Wall Street indices, which closed with losses of around 0.9 percent yesterday, continue to suffer losses in futures. Following Fed Chair Powell's speech, 2-year US bond yields fell, while the 10-year US bond yield fell slightly but is close to the critical 5 percent level. The Bloomberg Dollar Index fell 0.14 percent yesterday. Oil prices, which have been rising due to the conflicts in the Middle East, are preparing for their second consecutive weekly increase. The barrel price of Brent oil, which has been rising for four days, has risen above $93. The ounce of gold has gained 3 percent in the last four trading days. The USD/TL rate is above 28. Powell's 'pass' signal for November Fed Chair Jerome Powell stated that the US Federal Reserve is inclined to keep interest rates steady at the next Federal Open Market Committee meeting, while signaling that another rate hike is possible in the future if policymakers see more signs that economic growth is resilient. Powell's statements at the New York Economic Club yesterday strongly supported market expectations that the Fed will keep interest rates steady for the second time in a row at its meeting on October 31-November 1. Powell also noted that if the recent rise in bond yields continues, the need for future rate hikes may diminish. “The committee is proceeding cautiously, given the uncertainties, the risks, and how far we have come,” Powell said. “We will make decisions about the extent of additional policy tightening and how long policy will remain restrictive, depending on the aggregate data, the evolving outlook, and the balance of risks.” Evaluating Powell’s speech, Laura Rosner, Partner at Macropolicy Perspectives LLC, said, “He gave a very clear ‘pass the buck’ signal for November. He expects the economy to cool in the fourth quarter, and bond yields are doing some of that work for the Fed.”