Asian stocks fall on Iran attack on Israel: Markets Wrap

(Bloomberg) — Stocks in Asia fell on Monday, tracking a decline in U.S. stocks as markets grappled with rising tensions following Iran's unprecedented attack on Israel over the weekend.

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Stock benchmarks in Japan, South Korea and Australia all fell, while stock futures in Hong Kong also fell. U.S. stock contracts rose slightly in Asia after the S&P 500 suffered its worst session since January on Friday amid a flight to safety.

With investors already unsettled by persistent inflation and the prospect of higher interest rates in the longer term, there is a risk that the escalation of the Middle East crisis will lead to new volatility in the markets. As the conflict expands, many expect oil prices to exceed $100 a barrel and are anticipating a flight to government bonds, gold and the dollar, as well as further losses in stock markets.

Most Group of 10 currencies rose against the dollar on Monday, while Treasures stabilized in early Asian trading after yields fell in the previous session. Gold rose on rising demand for safe-haven assets, while aluminum rose more than 6% after the U.S. imposed sanctions on Russian trade.

“The escalated tensions over the weekend have unfortunately brought new bitter uncertainties that the financial world must digest,” said Hebe Chen, analyst at IG Markets. In Asia, “financial and technology sectors could see the biggest problems – higher energy prices are likely to cast a shadow over the inflation trajectory and lead to higher interest rates for a longer period.”

In Asia, Chinese stocks are facing a difficult week after the country's trading data was missed on Friday. Even if global risk sentiment improves and tensions in the Middle East ease, Chinese stocks may have to overcome their own headwinds.

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Elsewhere, developer China Vanke Co. said it was making plans to address liquidity pressures and near-term operating difficulties as China's top leaders grew increasingly concerned about the country's ongoing housing crisis and its impact on the faltering economy.

War nerves

While Iran said “the matter can be considered closed,” traders are now waiting to see whether the conflict escalates into a wide-ranging regional war. Still, nerves may have eased following a report that President Joe Biden told Israeli Prime Minister Benjamin Netanyahu that the U.S. would not support an Israeli counterattack against Iran.

“This could ultimately prove to be a fade for markets as Iran and Israel shy away from the abyss,” said Namik Immelbäck, chief strategist at Skandinaviska Enskilda Banken AB. “But in the short term, this is likely to lead to a reduction in positions, particularly for trend-following quant strategies,” which is likely to increase the typical flight to safety, he said.

Read more: Iran's attack on Israel sparks race to avert full-scale war

Bitcoin rebounded after falling nearly 9% following Saturday's attacks. Stock markets in Saudi Arabia and Qatar posted slight losses on Sunday due to low trading volumes. The Israeli stock benchmark fluctuated between gains and losses at least nine times before closing with a small gain.

Oil shrugged off Iran's attacks, with gains held in check by speculation that the conflict would remain contained. Brent crude has already risen nearly 20% this year and was last trading at around $90 a barrel.

Traders will soon turn their attention to upcoming economic data as they refine their bets on central bank easing cycles as well as the spring meetings of the International Monetary Fund and World Bank in Washington. Chinese growth data as well as inflation figures from Japan, the Eurozone and Great Britain are due this week.

Important events this week:

• Eurozone industrial production, Monday

• US retail sales, Empire manufacturing, corporate inventories, Monday

• Federal income taxes are due in the United States on Monday

• The spring meetings of the IMF and World Bank begin on Monday in Washington. The most important ministerial meetings will take place from April 17th to 19th

• Canada CPI, Tuesday

• China property prices, retail sales, industrial production, GDP, Tuesday

• UK Jobless Claims, Unemployment, Tuesday

• New Zealand home sales, CPI, Wednesday

• Eurozone CPI, Wednesday

• UK CPI, Wednesday

• Unemployment in Australia, Thursday

• Japan CPI, Friday

• Elections in India begin on Friday

Some of the key moves in the markets:

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• S&P 500 futures rose 0.1% at 9:20 a.m. Tokyo time

• Hang Seng futures fell 1.7%

• Japan's Topix fell 1.4%

• Australia's S&P/ASX 200 fell 0.6%

• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index has barely changed

• The euro was little changed at $1.0645

• The Japanese yen was little changed at 153.31 per dollar

• The offshore yuan was little changed at 7.2658 per dollar

• The Australian dollar was little changed at $0.6472

Cryptocurrencies

• Bitcoin rose 2.7% to $65,587.35

• Ether rose 2.2% to $3,136.3

Tie up

raw materials

• West Texas Intermediate crude fell 0.1% to $85.54 a barrel

• Spot gold rose 0.7% to $2,360.82 an ounce

This story was produced with support from Bloomberg Automation.

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