Good for stocks? Why Tom Lee says the attack on Israel could help equities.

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Steven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's economic, political and regulatory coverage. Follow Steve on Twitter: @MKTWgoldstein.

It may not seem obvious why an attack on Israel that has killed hundreds, already led to retaliatory strikes, as well as possible regional war, would be good for stocks.

And, on Day 1, it doesn’t appear it will be, with futures on the stock-market contracts ES00, -0.47% NQ00, -0.91% pointing to a weaker start. Market Snapshot: Dow industrials point to triple-digit decline Monday as Israel moves toward ‘complete siege’ of GazaHe said interest rates should decline sharply in a “risk off” environment where investors are reluctant to buy assets perceived as relatively risky.

“The rally in bonds could break the ‘short the bond market’ fervor that has gripped the rates market for the past month, . And as such, we believe a substantial decline in interest rates could happen with the 10-yr BX:TMUBMUSD10Y backing off from the high 4.8%-ish ranges seen lately,” Lee said in a note to clients.“It feels awkward to write about equity market impacts from the Israel-Gaza war. War is a tragedy and resulting in heart-breaking loss.

The U.S. bond market was closed Monday in observance of Columbus Day. Treasury futures TY00, +0.57%, though, were trading higher.

 

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