In a week packed with information on U.S. GDP and inflation as well as results from some of the biggest tech firms in the world, Asian equities fell on Monday as the threat of a larger Middle East conflict dampened optimism.

Bonds were also under stress as global borrowing rates rose and equities valuations were put to the test as U.S. 10-year Treasury yields edged closer to 5.0%. As partner Israel continued to bomb Gaza and violence on its border with Lebanon grew, Washington warned over the weekend that the United States’ interests in the area were at serious risk.

Even though no increases are anticipated from the European Central Bank or the Bank of Canada, investors will still pay attention to futures market direction.

Without the central banks having to take action, the recent spike in bond rates has tightened monetary conditions, allowing the Federal Reserve to hint it would probably remain on hold at its policy meeting next week. Futures indicate a 70% possibility that the Fed will stop tightening for this cycle and instead consider cutting interest rates starting in May next year.

Most of the main indexes fell last week due to the rise in rates, which also caused the VIX “fear index” of U.S. stock market volatility (.VIX) to reach its highest level since March.

The largest MSCI index of Asia-Pacific equities outside of Japan (.MIAPJ0000PUS) fell 0.4% on Monday, falling to its lowest level over a year. The blue-chip index for China (CSI300) fell 0.7% to reach its lowest level since early 2019.

The Nikkei 225 (Japan) and the KS11 (South Korea) markets declined by 0.4%. Both FTSE futures and EURO STOXX 50 futures remained unchanged. Expectations are that a barrage of earnings releases this week will help support an increase of 0.2% in both S&P 500 and Nasdaq futures. Super Caps Alphabet (GOOGL.O), Amazon (AMZN.O), Microsoft (MSFT.O), and Meta Platforms (META.O) are all reporting. It also includes IBM (IBM.N) and Intel (INTC.O.).

GRAPHIC SURGE

The robust consumer demand could help to sustain profits this week, as the annualized growth of the U.S. gross domestic product is predicted to be a dizzying 4.2% and the nominal growth to reach as high as 7%.

In a note, Bruce Kasman, chief economist at JPMorgan, stated that “last quarter’s modest increase in hours worked points to a strong productivity gain and surge in corporate profits.”

“As corporate and household income share the benefits of this nominal activity surge, the underlying resilience of the U.S. private sector is being reinforced.” This U.S. performance has supported the dollar, but the prospect of Japanese intervention has temporarily kept it around or near 150.00 yen. Just behind its most recent high of 150.16 yen, the dollar last traded at 149.90 yen.

After the Nikkei newspaper reported that the Bank of Japan was debating another adjustment to its yield curve management strategy, which might be disclosed at its policy meeting on October 31, yields in Japan also increased. The Swiss franc was steady at 0.8927 per dollar after benefiting from haven flows over the previous several weeks, while the euro was unchanged at $1.0582.

Gold, which reached its highest price since May last week, has also drawn a safety bid and is currently trading at $1,970 per ounce. In the absence of any disruption to Middle Eastern supply, at least for the time being, oil prices lost some ground. While U.S. crude fell 82 cents to $87.26 per barrel, Brent was last down 73 cents to $91.43 per barrel.