Volkswacht Bodensee - Global stocks retreat further on Middle East fears

Wall Street stocks declined Friday, as investors looked to lower their risk going into the weekend.

The Dow Jones Industrial Average lost 0.9 percent, while the S&P and Nasdaq indexes fell over one percent.

The yield on the 10-year US Treasury, which briefly rose this week to levels not seen since 2007 amid concerns the Fed is entering a long period of high interest rates, slipped slightly.

The Federal Reserve has been raising its benchmark lending rate to cool demand and bring down stubborn inflation, with some success. Nevertheless, rates remain stuck above its long-term target of two percent.

At the same time, markets are warily eyeing ongoing conflict in the Middle East, for signs it could spread to other countries.

"Going into the weekend there is a downward trend as short-term investors try to square positions," Jack Ablin, Cresset Capital's chief investment officer, told AFP.

"There is an unwillingness from certain investors (to) hold risk positions over the weekend," he added.

Major stock markets in Europe closed down more than one percent, while those in Asia also saw declines.

Oil prices finished slightly slower.

- Economic impact of conflict -

The US Federal Reserve warned Friday that the recent attack on Israel and the ongoing Ukraine conflict could cause harm to the world economy and boost global inflation.

Hamas carried out a deadly attack on Israel from the Gaza Strip on October 7, and killed at least 1,400 people, mostly civilians who were shot, mutilated or burned to death, according to Israeli officials.

In response, Israel launched a relentless bombing campaign on Gaza. More than 4,100 Palestinians, mostly civilians, have been killed, according to the latest toll from the Hamas-run health ministry.

"The attack on Israel, in conjunction with Russia's ongoing war against Ukraine, has ratcheted up geopolitical tensions," the Fed said in its semi-annual report on financial stability.

"Escalation of these conflicts or a worsening in other geopolitical tensions could reduce economic activity and boost inflation worldwide," it added.

Elsewhere in Washington, fresh figures published Friday showed the US budget deficit for the past year widened to $1.7 trillion, in a development that could add pressure on President Joe Biden as he seeks reelection in 2024.

The deficit expanded by $320 billion for the fiscal year ending September 30, following a drop in tax revenues and lower deposits of earnings by the Fed on the back of higher interest rates.

- Key figures around 2045 GMT -

New York - Dow: DOWN 0.9 percent at 33,127.28 points (close)

New York - S&P 500: DOWN 1.3 percent at 4,224.16 (close)

New York - Nasdaq Composite: DOWN 1.5 percent at 12,983.81 (close)

London - FTSE 100: DOWN 1.3 percent at 7,402.14 (close)

Frankfurt - DAX: DOWN 1.6 percent at 14,798.47 (close)

Paris - CAC 40: DOWN 1.5 percent at 6,816.22 (close)

EURO STOXX 50: DOWN 1.6 percent at 4,024.68 (close)

Tokyo - Nikkei 225: DOWN 0.5 percent at 31,259.36 (close)

Hong Kong - Hang Seng Index: DOWN 0.7 percent at 17,172.13 (close)

Shanghai - Composite: DOWN 0.7 percent at 2,983.06 (close)

Euro/dollar: UP at $1.0598 from $1.0583 on Thursday

Pound/dollar: UP at $1.2164 from $1.2142

Dollar/yen: UP at 149.84 yen from 149.81 yen

Euro/Brent North Sea crude: DOWN 0.2 percent at $92.16 per barrel

West Texas Intermediate: DOWN 0.7 percent at $88.75 per barrel

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T.Suter--VB