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Stocks of defence companies in US markets have increased to over three-year high in a session as an attack on Israel from Hamas, the Gaza-based terrorist group, renewed Wall Street’s focus on the security industry.
On Monday, shares of arms makers — including Northrop Gruman Corp, L3Harris Technologies Inc., Huntington Ingalls Industries Inc., Lockheed Martin Corp. and General Dynamics Corp. — led gains in the S&P 500 Index. The stocks each gained at least 8 per cent in the session, the most in more than three years.
The war in Israel has sparked fresh concern about geopolitical risk among investors who have already been grappling with the impact of elevated interest rates and signs of trouble in China’s economy.
“Hamas’ attack on Israel over the weekend will likely bring investor attention back to defence stocks,” Truist Securities analyst Michael Ciarmoli wrote in a note to clients. The shares have been underperforming this year due to uncertainty about the US’s military budget, he said.
Oil prices also witnessed a surge, boosting energy companies and weighing on travel stocks from around the globe. Outside the US, the conflict weighed on shares of businesses with connections to Israel, including chipmakers and software providers.
Broad, regional stock indexes in Asia were little changed Monday, while European markets edged lower. Markets in Japan, South Korea and Taiwan were closed for a holiday, while a typhoon interrupted trading in Hong Kong.
In the US, the S&P 500 rose 0.6 per cent to 4,335.7, and the Nasdaq composite rose 0.4 per cent to close at 13,484.2.
“Nerves are showing signs of being frayed again, just as investors had started to breathe a sigh of relief that the US might be heading for a softer landing,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Here are some global themes to watch:
Defence
The S&P 500 Aerospace & Defense Index rose 5.6 per cent in US-based trading, the gauge’s best day since Nov. 2020. RTX Corp. and Leidos Holdings Inc. gained 4.6 per cent and 3.8 per cent, respectively.
BAE Systems Plc gained 4.5 per cent in London, the best day since August.
Meanwhile, US shares of Israeli company Camtek Ltd fell 8.8 per cent, the worst day since March 2022, and CyberArk Software Ltd. gained 0.5 per cent.
Travel
Airline stocks slid Monday after some companies halted flights with Israel. The Bloomberg World Airlines Index shed 2.6 per cent, the biggest one-day drop since March. Delta Air Lines Inc., United Airlines Holdings Inc. and American Airlines Group Inc. shares all fell more than 4 per cent as the cohort canceled services to Tel Aviv.
Flights to the city were also halted by European companies Deutsche Lufthansa AG, Air France-KLM and budget specialist Wizz Air Holdings Plc, sending shares lower. Iberia Express parent IAG SA fell 6.1 per cent, and Ryanair Holdings plc lost 3.7 per cent in local markets.
Asian carriers including Air India Ltd. and Cathay Pacific Airways Ltd. also suspended service to Israel.
Oil, Shipping
While Israel isn’t a big producer of oil, the rest of the region is. Already, the conflict is pushing up the price of the commodity and stocks linked to it.
West Texas Intermediate crude climbed 4.3 per cent as a war-risk premium returned to markets. Shares of Asian producers — including Australia’s Woodside Energy Group Ltd. and Santos Ltd. — gained. In London, Shell Plc and BP Plc both advanced about 2.6 per cent. US-based Exxon Mobil Corp. and Chevron Corp. closed 3.5 per cent and 2.8 per cent higher, respectively.
Energean Plc was a notable exception to the energy rally, falling 18 per cent in London. The natural-gas producer’s flagship production and development assets are fields off the coast of Israel.
Technology
Semiconductor stocks from Nvidia Corp. and Applied Materials Inc. were dragged down amid concern over the possible impact on Intel Corp.’s plans. Intel in June agreed to build a new manufacturing plant in Israel, as part of a push by the firm and its peers to diversify their production sources. Prime Minister Benjamin Netanyahu had at the time placed the deal’s value at $25 billion.
Traders will watch for potential impact in local shares of Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. when trading resumes after a holiday.
Cybersecurity stocks were also in focus. US-listed shares of Check Point Software Technologies Ltd., which is headquartered in Tel Aviv, dropped 1.5 per cent, while Datadog Inc. slid 3.9 per cent.
Shares of Indian software exporters with operations in Israel, including Infosys Ltd., Tech Mahindra Ltd. and Wipro Ltd., slipped.
Generic Drugs
Traders watched shares of global generic-drug makers given the potential for an impact on sector bellwether Teva Pharmaceutical Industries Ltd., which is based in Tel Aviv. Teva was up 2.9 per cent locally.
Dr. Reddy’s Laboratories Ltd. shares increased in Mumbai. India’s Sun Pharmaceutical Industries Ltd., which owns a 72 per cent stake in Israel’s Taro Pharmaceutical, shed 0.4 per cent.
Israel Revenue
Companies that count Israel among their major markets will continue to be on traders’ radar. These include China’s Nanjing Xinjiekou Department Store Co., which slipped 0.9 per cent, as well as: US-listed Taboola.com Ltd., Kenon Holdings Ltd., and Taiwan’s Lanner Electronics Inc.
In Singapore, Israeli venture-capital firm Trendlines Group Ltd. fell 2.2 per cent. India’s Adani Ports Ltd., which owns the Haifa port, slid nearly 5 per cent.
Gold
Finally, Asian gold miners — such as Australia’s Newcrest Mining Ltd. — rose with the precious metal on haven demand.
With inputs from Reuters
English (US)