Asia stocks track US gains as Iran fears ease but traders on alert
Mourners crowded the streets of Tehran on Monday to pay homage to Qasem Soleimani, whose assassination has sparked fears of a US-Iran conflict (-)
Hong Kong (AFP) – Equities rebounded while safe havens such as oil and gold retreated Tuesday as fears of a Middle East conflict abated for now, though investors remained on alert for any escalation after the US assassination of a top Iranian general.
With few major developments in the crisis fuelled by the killing of Qasem Soleimani last week, traders were able to turn their attention back to the global economic outlook and the China-US trade deal signing planned for January 15.
Wall Street provided a positive lead, with all three main indexes reversing early losses to end in the green as traders welcomed strong service sector data from the US, Europe and Britain that provided hope that the worldwide growth slowdown was easing.
Asian markets were broadly higher, with Tokyo ending the morning more than one percent better off, while Hong Kong added 0.7 percent and Shanghai rose 0.4 percent.
Sydney climbed more than one percent while Seoul jumped 0.9 percent and Singapore put on 0.6 percent. Manila and Jakarta were also higher but Wellington and Taipei eased slightly.
Observers said the limited impact on markets was mostly because the standoff is not expected to have a massive impact on global growth.
The shift back to riskier assets saw oil prices retreat, having rallied almost seven percent in the previous two days, while gold slipped from six-and-a-half-year highs.
– ‘Wait-and-see mode’ –
But analysts warned that the mood could change in a split second, with Donald Trump warning of a “major retaliation” if Iran carries out any revenge attacks.
“It’s wait-and-see mode here,” said Steve Chiavarone, at Federated Investors. “How much, if at all, do things escalate with Iran and does it ultimately impact the global economic outlook? Right now, not so much. Could it change? Sure.”
And Tapas Strickland, at National Australia Bank, added: “The potential for this to spiral into a cycle of retaliation remains and markets will likely remain cautious.”
The strike on such a high-profile member of the Iranian regime has also raised the question of when and how, not if, Tehran will retaliate, which experts say will likely continue to support crude.
“The US strike in Iraq last week offers up a speculator’s delight on the belief that Iran will need to muster up a sufficient response to mobilise local nationalist support,” said AxiTrader’s Stephen Innes.
“But it’s the great unknowns around what form of retaliation will transpire and the unlikelihood of de-escalation that should continue to support the higher risk premiums over the medium term.”
He pointed out, however, that there was a lot of production capacity around the world, including US shale, that could prevent prices from soaring.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.5 percent at 23,552.97 (break)
Hong Kong – Hang Seng: UP 0.7 percent at 28,428.90
Shanghai – Composite: UP 0.4 percent at 3,094.16
Brent Crude: DOWN 44 cents at $68.47 per barrel
West Texas Intermediate: DOWN 42 cents at $62.85
Pound/dollar: UP at $1.3172 from $1.3167 at 2140 GMT
Euro/pound: DOWN at 84.99 pence from 85.02 pence
Euro/dollar: DOWN at $1.1193 from $1.1195
Dollar/yen: UP at 108.44 from 108.40 yen
New York – Dow: UP 0.2 percent at 28,703.38 (close)
London – FTSE 100: DOWN 0.6 percent at 7,575.34 (close)
— Bloomberg News contributed to this story —
Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.