Wall Street slips on Gaza war permanent ceasefire uncertainty

On Friday, US stocks closed mixed in a shortened session on hopes of an extended pause in the Gaza war after the scheduled 4-days will expire Monday. Over the weekend, although there was some tension late Sunday about Hamas’ alleged violation of the truce agreement by Israel, eventually all sorted out by Qatar mediation.  On Monday, all focus was on the highly expected extended Gaza war pause as there is a provision in the original agreement that Israel will allow one additional day of pause for the release of every ten hostages by Hamas and Israel also has to release proportionate Palestine captives held in their prison camps. Accordingly,

Late Monday, Qatar’s foreign minister announced a deal has been reached to extend the Gaza truce by two days. Hamas said the truce was extended in agreement with Qatar and Egypt, as Israel had said it was open to extending a pause in fighting in exchange for the release of more captives held in Gaza. Qatar official said:

·         Truce extension means 20 more Gaza captives, 60 Palestinians to be freed in 2 days

·         Under the provisions of the original deal, 10 Gaza captives will be released each day of the extension

·         We have from Hamas a confirmation now that 20 extra hostages will be released in the next two days

·         On the Palestinian side, that would mean that … 60 Palestinians would be released from Israeli prisons

·         Deliveries of humanitarian aid to Gaza will also continue, as will the pause in fighting

·         Gaza truce extension marks a hopeful moment that Qatar hopes it can build on to increase the number of captives being released and prepare the ground for a more sustainable truce

·         We are hoping first of all that we will increase the number of hostages coming out of Gaza

·         Every day that we can buy of calm, of course, is very precious for the people of Gaza, especially when it comes to bringing in humanitarian aid

·         Negotiations will continue over the next 48 hours in hopes of further extending the truce and securing the release of more civilian captives

·         We are hoping that this momentum will help us in opening the door for negotiations for a more lasting and sustainable truce

·         The Qatari mediation team has been working day and night

·         I’m quite sure the team will have more work to do now as we go on to these two extra days

·         Negotiations so far have focused on the release of civilian captive

·         The priority we had was getting those who are most at risk out before discussing the more long-term issues. As soon as we are finished with first of all, the women and children, and then the civilian men, we will start negotiating over the military personnel who are being held in Gaza

Hamas official said truce extension ‘good news’, urges end of the war:

·         Hamas wants to stop the war and the aggression against the Palestinian people

·         I hope we can extend until we reach the end of this war and aggression on our people in Gaza

·         I think there is big support across the Qatari government the Egyptian government, and even Western governments, they want the ceasefire

·         Hamas hopes to see the international community pressure Israel to end its occupation and to end this catastrophe against Palestinians

The White House also welcomes a truce extension. The U.S. National Security Council spokesman Kirby said:

·         Hopes it will be extended further

·         To extend the pause, Hamas has committed to releasing another 20 women and children over the next two days

·         We hope to see the pauses extended further and that would depend on Hamas releasing more hostages

·         US’s diplomatic approach is getting aid into the Gaza Strip and Americans out

·         We will continue to urge the Israelis, as they conduct military operations, to do so with the utmost care for innocent civilian life

·         President Biden will continue to work to extend the pause beyond the additional two days

The U.S. President Biden said:

·         I have consistently pressed for a pause in the fighting to accelerate and expand the humanitarian assistance going into Gaza and facilitate the release of hostages

·         I remain in contact with leaders of Qatar, Egypt, and Israel to make sure every aspect of the deal is implemented

The EU foreign policy chief Borrell also welcomed the Gaza war temporary truce extension. Borrell said he conveyed his support for the extension in talks with the Egyptian Foreign Minister: “I conveyed our support to achieve an extension of the truce to allow for more humanitarian aid to Gaza and further release of hostages. I commended Egypt’s key role in achieving this agreement.”

The Qatari PM/FM discussed the latest developments in the Gaza war in a call with US Secretary of State Blinken and stressed the necessity of continuing efforts to stop the war. As per the report, Blinken will travel to Israel, the occupied West Bank and the UAE this week and will press for more humanitarian aid to Gaza, the release of more Hamas captives and work to improve protections for civilians in the Strip. Blinken will also discuss the future of Gaza and the need for an independent Palestinian state with ‘regional partners’.

But, until late Monday, there’s been no official comment/confirmation, about the extended Gaza war truce from Israel.  Israel Defense Forces (IDF) spokesperson Hagari said:

·         The extension of the truce with Hamas for another two days is not final

·         We are managing a deal through mediators around the clock. Nothing is final until it happens

·         Things are progressing, tonight as well, but patience is required

·         The fourth round of releasing hostages held by Hamas is now underway, with 11 Israelis on their way back to the country's territory

Earlier, the Israeli Defence Minister Gallant met with soldiers and told them to expect a rested and reinvigorated Hamas when the fighting resumes. Gallant also pointed out IDF soldiers would be put in confrontation with Hamas fighters only at the last resort, if required after extensive aerial bombing and shelling by tanks:

·         Israeli military action post-truce will be bigger throughout Gaza

·         You will meet something that is a little more prepared, so they will meet the bombs of the air force first, and after that the shells of the tanks and artillery, and the paws of the D9, and finally the shooting of the infantry fighters

Overall, the market is now expecting an extended Gaza war pause followed by a permanent ceasefire and a feasible/sustainable peace/two-state solution to end this legacy problem forever. It now also seems that Hamas has almost broken and is ready to surrender with a face-saving strategy/formula after months of extensive Israeli military operations, costing over 22K civilian lives with the complete/80% destruction of Northern Gaza; Israeli also lost around 1700 civilian lives due to the horrendous act of terrorism by Hamas on 7th October.

Market wrap:

On Monday, Wall Street Futures were undercut by the lingering uncertainty about a permanent Gaza war ceasefire but also buoyed by lower bond yields after an upbeat bond auction (showing resilient demand for U.S. debts) and softer-than-expected U.S. home sales. Blue chip DJ-30 edged down -0.16% (around -60 points), broader SPX-500 lost -0.20%, while tech-heavy NQ-100 inched down -0.13%.

On Monday, Wall Street was dragged by healthcare, industrials, communication services, energy (volatile/lower oil), banks & financials, consumer staples, and materials, while boosted by interest rate sensitive real estate, consumer discretionary, utilities and techs to some extent. Amazon helped with blockbuster online sales (Black Friday and Cyber Monday). Dow Jones was boosted by Nike, Intel, IBM, SalesForce, and Home Depot, while dragged by Walgreens Boots, Walt Disney, Cisco, J&J, United Health, Amgen, Merck, Goldman Sachs and Chevron.

On Monday, Gold surged to almost 2018 from Friday’s closing levels around 2005. Gold was also boosted by reports of growing Chinese demand. Silver also jumped to a multi-month high amid higher industrial/EV/telecom/5G demand and lower supply due to lower output from key producing countries (Mexico and Peru).

On early Monday, oil slipped further on OPEC+ production cut uncertainty and subdued Chinese data. But oil later stabilized, snapping 3-day losing streaks on hopes of a deeper OPEC+ production cut agreement for 2024. The OPEC+ meeting has been postponed from 26th to 30th November for back-door discussions about the next agreement:

·         Kuwait: We are committed to OPEC decisions, especially market quotas and oil production - Oil Ministry

·         Saudi Arabia seeks OPEC+ quota cuts, while some members resist

·         Saudi Arabia has asked other members of the OPEC+ coalition to reduce their oil output quotas to shore up global markets, but some members are resisting

·         The OPEC+ leader Saudi Arabia has been reducing supply by -1 mbpd largely unilaterally (voluntary) since July, and is now seeking additional support from the OPEC+

·         The Saudi proposal comes amid difficult negotiations for the producers' group, which was forced to postpone its policy meeting by four days to Nov. 30 due to Angola and Nigeria's refusal to reduce their quota limits for 2024, which were set at the OPEC+ last conference

·         An OPEC+ source said it’s considering bigger oil output cuts

Technical trading levels: DJ-30, NQ-100 Future and Gold

Whatever may be the narrative, technically Dow Future (35372), now has to sustain over 35450-35550 levels for a further rally to 35650/35750-35850/36000 and a further 37300 in the coming days; on the other side, sustaining below 35350-35250, Dow Future may again fall to 35000-34800/34650-34120/34000 and 33700/33200-33000/32400 in the coming days.

Similarly, NQ-100 Future (16004) now has to sustain over 16200 for a further rally to 16700-16800 zones; otherwise sustaining below 16150-16050, may again fall to around 15100-14140 in the coming days.

Technically Oil (75.00) now has to sustain over 77.50-79.50 for a further rally to 82.50/84.50-90.50/95.50; otherwise sustaining below 77.00-76.50/75.00, may again fall to 73.80/71.80-71.40/70.00 and even 66.40-65.40 in the coming days (if OPEC+ is unable to agree for a deeper cut and Saudi Arabia withdraws the voluntary cut).

Also, technically Gold (XAU/USD: 2014) now has to sustain over 2025-2027 for any further rally to 2035/2050-2065/2085; otherwise sustaining below 2020/2015 may fall to 2010/2005-2000/1995, and further to 1985/1975-1960/1950 and 1928/1908-1895/1885 and 1850/1810 in the coming days (if there was a permanent Gaza war ceasefire and Fed sounds more hawkish than being expected).