Haven assets are set to be in focus in Asia Monday as traders nervously watch events in the Middle East, with the prospect of a ground offensive in Gaza looming large over markets.
(Bloomberg) — Haven assets are set to be in focus in Asia Monday as traders nervously watch events in the Middle East, with the prospect of a ground offensive in Gaza looming large over markets.
Equity futures in Australia, Japan and Hong Kong are pointing to early losses when markets open, after US stocks fell on Friday as traders sought out safety. The US dollar and yen were steady in early trading on Monday as the US held talks with Iran through back-channels to head off a widening of the conflict, with the exchange of fire growing more intense on Israel’s border with Lebanon.
A sharper escalation of the crisis could bring Israel into a direct clash with Iran, a supplier of arms and money to Hamas, which the US and the European Union have designated a terrorist group. In that scenario, Bloomberg Economics estimates oil prices could soar to $150 and global growth drop to 1.7% — a recession that takes about $1 trillion off world output.
“The Palestinian cause holds deep personal significance for many in the Arab world, and attempting to sideline it or prioritize economic interests over it in high-level diplomacy is a dangerous illusion,” Stephen Innes, managing partner at SPI Asset Management, said in a note Monday. “Hence, this is the primary reason an Israeli escalation in Gaza is a colossal powder keg waiting to ignite.”
The Australian dollar remained subdued on Monday, while New Zealand’s currency advanced after voters elected a new government.
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Big tech sold off on Friday in New York, with the Nasdaq 100 down over 1%. Boeing Co. sank after saying it’s investigating quality issues affecting the 737 Max aircraft. JPMorgan Chase & Co. and Wells Fargo & Co. gained on solid earnings. Treasury 30-year yields dropped 10 basis points to 4.75%, unwinding part of the previous session’s surge. West Texas Intermediate crude neared $88 a barrel.
Jamie Dimon on Friday warned of serious geopolitical risks from a widening Israel-Hamas conflict.
“This may be the most dangerous time the world has seen in decades,” the JPMorgan Chase & Co. chief executive officer said in the bank’s third-quarter earnings statement. “The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships.”
Traders also waded through the latest economic data and comments from central bank officials for clues on the policy outlook. Federal Reserve Bank of Philadelphia President Patrick Harker said disinflation is under way and reiterated that he favors holding interest rates where they are, barring a sharp change in data, despite a lift in US consumers’ year-ahead inflation expectations in early October.
Markets will also be parsing key economic data this week to gauge the health of the global economy. Among the highlights are Chinese growth data, inflation readings in Japan and New Zealand as well as central bank decisions in China, Indonesia and South Korea. Meantime, Fed chairman Jerome Powell is set to speak later this week following a string of stronger than expected data readings.
“Markets and policymakers have absorbed strong employment data and slightly higher inflation readings,” said Klaus Baader, global chief economist at Societe Generale. “Despite it all, Fed officials are signaling the peak of rates has been reached and keeping the debate on pace and timing of cuts down the road.”
Some of the main moves in markets at 6am Tokyo time:
- S&P 500 fell 0.5% in New York on Friday
- Nasdaq 100 fell 1.2%
- Hang Seng futures fell 0.3%
- S&P/ASX 200 futures fell 0.4%
- Nikkei 225 futures fell 1.1%
- The euro was little changed at $1.0515 as of 4:56am in Tokyo
- The Japanese yen rose 0.1% to 149.36 per dollar
- The offshore yuan was little changed at 7.3116 per dollar
- The Australian dollar rose 0.1% to $0.6303
- Bitcoin was little changed at $27,217.45
- Ether was little changed at $1,564.9
- The yield on 10-year Treasuries declined eight basis points to 4.61% on Friday
- West Texas Intermediate crude rose 5.8% to $87.69 a barrel on Friday
- Spot gold rose 3.4% to $1,932.82 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
More stories like this are available on bloomberg.com
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