Written by Lei Wee
SINGAPORE (Reuters) – Asian stocks fell on Monday, gold prices tumbled as risk sentiment took a hit after Iran's retaliatory attacks on Israel raised concerns about escalating regional conflict and alarmed traders. Rose.
The dollar has hit a new 34-year high against the yen, as there is a growing expectation that interest rates will remain high for a long time due to persistent inflationary pressures in the United States.
MSCI's broadest range of Asia-Pacific stocks outside Japan comes after Iran launched explosive drones and missiles toward Israel late Saturday in retaliation for Israel's alleged attack on its Syrian consulate on April 1. The index fell 0.7%.
The region is under tension as war breaks out between arch-enemies in the Middle East and threatens to involve the United States. US President Joe Biden has warned Prime Minister Benjamin Netanyahu that the US will not participate in a counterattack against Iran.
“The operation is not over yet,” Israel said.
Amid rising geopolitical tensions, there was tension in Asian markets on Monday, with Japan's Nikkei stock average down 1% and Australia's S&P/Australian Stock Exchange 200 index down nearly 0.5%.
Hong Kong's Hang Seng Index fell 0.63%.
Gold prices rose more than 0.5% to $2,356.39 per ounce as a result of the flight to safety, while the dollar price remained firm. [GOL/]
However, oil prices showed little reaction to the news as traders were largely pricing in a retaliatory attack from Iran that would likely cause further disruption to supply chains. This pushed Brent crude oil futures to $92.18 a barrel last week, the highest level since October.
Brent crude oil futures were last down 0.24% at $90.23 per barrel, and US West Texas Intermediate crude futures were down 0.35% at $85.36 per barrel. [O/R]
Neil Shearing, group chief economist at Capital Economics, said: “The key risks to the global economy are whether this turns into a broader regional conflict and what the reaction will be in energy markets.”
“While higher oil prices will complicate efforts to bring inflation back on target in advanced economies, it will only have a material impact on central bank decisions if higher energy prices spill over into core inflation. ”
U.S. stock futures rose following a sharp selloff on Wall Street on Friday after unimpressive results from major U.S. banks. [.N]
S&P 500 futures and Nasdaq futures each rose about 0.4%.
Eurostoxx 50 futures were flat, down 0.22%, while FTSE futures were down 0.5%.
But China was an outlier, with stocks rising after the country's securities regulator released draft rules on Friday that would tighten oversight of listing, delisting companies and computer-based program trading.
Market participants took the move as a positive signal to improve China's sluggish stock market and protect investors' interests.
The country's blue-chip CSI300 index rose nearly 2%, while the Shanghai Composite Index rose 1.2%. [.SS]
Reconsidering fees
Elsewhere, U.S. Treasury yields remained near recent highs as traders rolled back expectations for the pace and size of the Federal Reserve's rate cuts this year. [US/]
The benchmark 10-year bond yield last time was 4.5605%, and the 2-year bond yield remained around the 5% level, from 4.9269% last time.
Continued resilient US economic data, especially the better-than-expected inflation report released last week, could keep US interest rates high for an extended period, with the Fed's easing cycle starting in June There is a growing view that the possibility of this happening is low.
Futures markets currently predict about 44 basis points (bp) of easing this year, a significant decline from the 160 basis points expected at the beginning of the year.
The big change in the interest rate outlook, in turn, sent the dollar plummeting, pushing it to a 34-year high of 153.85 yen on Monday.
The euro and pound were similarly locked near five-month lows. [FRX/]
“We have updated our forecasts for the US FOMC, pushing back the start of the rate cut cycle from the previous July date to September 2024,” Commonwealth Bank of Australia senior economist Christina Clifton said.
“For the first three months of 2024, U.S. CPI was stronger than expected. It takes less than 0.2% per month for interest rates to rise, as the Fed is confident that inflation can remain sustainably low. We expect that a series of inflationary outcomes will be required, but there is no need to remain at a restrictive level. ”
A number of Fed policymakers are scheduled to speak this week, including Chairman Jerome Powell, who could provide further clarity on the future direction of U.S. interest rates.
The world's largest cryptocurrency continued to break records this year thanks to new spot Bitcoin exchange-traded fund inflows and speculation of an impending Fed rate cut, but changes in interest rate expectations halted Bitcoin's ferocious rally. Ta.
Bitcoin fell more than 3% to $65,010, weighed down by a global risk-off mood. [FTX]
(Reporting by Lei Wee in Singapore; Editing by Lincoln Feast and Jamie Freed)
