Asian shares hit a six-week low today as investors grappled with escalating tensions in the Middle East, disappointing bank earnings, and the likelihood of the Federal Reserve maintaining higher interest rates for an extended period.
The regional equities gauge dipped, mirroring Friday’s decline in US stocks. Benchmarks in Hong Kong, Japan, and South Korea all saw drops, while mainland China’s shares rose, particularly in the energy sector.
Despite an unprecedented attack on Israel over the weekend, global markets showed signs of stability. Iran suggested the matter might be resolved, and President Joe Biden reportedly assured Israel that the US would not support a retaliatory strike against Iran.
Futures for US equities inched higher in Asian trading after the S&P 500’s worst session since January on Friday, driven by a flight to safety. Oil prices eased as speculation mounted that the conflict would remain contained, with Brent crude steadying around $90 a barrel.
Meanwhile, aluminum and nickel prices surged following new US and UK sanctions banning deliveries of Russian supplies after midnight on Friday.
In China, authorities kept a key interest rate unchanged while withdrawing cash from the banking system for the second consecutive month, despite stagnant price growth last month, prompting calls for more stimulus.
Amidst concerns over inflation and the prospect of prolonged higher interest rates, the Middle East crisis could inject fresh volatility into markets. As the conflict escalates, oil prices could surpass $100 a barrel, leading to a flight to safe havens like Treasuries, gold, and the dollar, alongside further stock market declines.
Bitcoin rebounded after a nearly 9% dip following the attacks. Stock markets in Saudi Arabia and Qatar posted modest losses on Sunday under thin trading volumes. Israel’s equity benchmark fluctuated before closing with a slight gain.
As Wall Street’s earnings season commenced, big banks’ results provided insight into the US economy’s performance amid uncertain interest rate trends. JPMorgan Chase & Co. and Wells Fargo & Co. reported lower-than-expected net interest income, while Citigroup Inc.’s profits exceeded estimates.
Traders are now eyeing forthcoming economic data and international meetings for cues on central bank policies and market trends. This week, data on Chinese growth and inflation readings from Japan, the Eurozone, and the UK are expected.
