Business Maverick

Business Maverick

Asian stocks fall, oil gains on Middle East tensions: markets wrap

Asian stocks fall, oil gains on Middle East tensions: markets wrap
Flags outside the Exchange Square Complex, which houses the Hong Kong Stock Exchange, in Hong Kong, China, on Tuesday, 23 January 2024.

Shares in Asia declined on Friday, tracking US stocks as interest rate uncertainty and geopolitical tensions weighed on sentiment.

The MSCI Asia Pacific Index slid 1.1% as benchmarks in Hong Kong, South Korea and Australia all retreated, with Japan’s Topix Index heading for the worst week in about a year as the yen climbed. Markets in Mainland China and Taiwan remained closed for a second day. Contracts for US stocks were little changed Friday after the S&P 500 and Nasdaq 100 indexes both fell. 

Brent crude climbed toward $91 a barrel on Friday, near its highest since October, as Israeli Prime Minister Benjamin Netanyahu said at a security cabinet meeting his country will operate against Iran and its proxies and will hurt those who seek to harm it. President Joe Biden told Netanyahu during a call that US support for his war would depend on new steps to protect civilians.

“If we get a direct conflict between Israel and Iran, that’s something that will likely restrict the supply of oil coming from the Middle East,” said Matt Maley, chief market strategist at Miller Tabak + Co. “That has not been an issue up until now, but it could become one very quickly.”

The yen extended a rally to hit a two-week high as Bank of Japan governor Kazuo Ueda stoked bets about an additional interest rate hike later in the year. The currency had risen by the most in nearly a month against the dollar on Thursday, pulling it back from levels that traders speculated would spark intervention.

Meanwhile, Treasury Secretary Janet Yellen kicked off her latest visit to China with a pledge to work toward better economic ties. Relations between the world’s two biggest economies have shown signs of improvement since Biden and Xi Jinping met in person in November, although deep differences remain.

Investors are focusing on US payrolls data due later on Friday, which is expected to show more than 200,000 new roles added to the economy in March. A further sign of robust activity may lead the Federal Reserve to keep rates higher for longer.

Jobs data

Fed Bank of Minneapolis president Neel Kashkari said on Thursday that rate cuts may not be needed this year if progress on inflation stalls. He was among the more than a half-dozen central bank officials speaking ahead of the release of the March jobs data. Meanwhile, Cleveland Fed counterpart Loretta Mester suggested the central bank could be getting close to the level of confidence it needs to begin lowering interest rates in the next few months.

“As always, the monthly jobs report will have the final say,” said Chris Larkin at E*Trade from Morgan Stanley. “Investors will be looking for a ‘Goldilocks’ number that won’t give the Fed any reason to delay rate cuts, but also doesn’t suggest the labor market is taking a serious downturn.”

In other commodities, gold inched lower on Friday after touching a fresh record earlier in the week. Copper rallied to the highest in 14 months, extending gains that began in February in the bellwether industrial metal in response to rising supply risks.

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