HONG KONG– Asian stocks fell on Monday as concerns about the potential escalation of tensions in the Middle East rattled financial markets, prompting investors to look for safer places for their money.
US futures rose and oil prices fell despite tensions raging in the Middle East, where an attack on Saturday night marked the first time Iran has launched a military attack on Israel despite decades of enmity dating back to the Revolution. Islam of 1979 in the country.
A barrel of U.S. benchmark oil fell 41 cents to $85.25 a barrel. Brent crude, the international standard, lost 24 cents to $90.21. Slower demand from China, combined with forecasts that supply growth is outpacing demand, has kept prices in check.
“While the drone attack grabbed the headlines, its immediate impact on global markets, especially oil prices and inflation concerns, may be moderate,” said Stephen Innes, managing partner at SPI Asset Management, in a commentary. . “The precision and limited lethal impact of Iran’s response suggest a strategic approach aimed at minimizing damage rather than increasing tensions.”
Japan’s benchmark Nikkei 225 index fell 1% in morning trading to 39,114.19.
In foreign exchange trading, the US dollar rose to 153.71 Japanese yen from 153.07 yen, hitting another 34-year high as investors switched to the traditional safe-haven currency. The euro was $1.0650, up from $1.0635.
S of Australia&P/ASX 200 fell 0.6% to 7,743.80. South Korea’s Kospi fell 1.1% to 2,653.06.
Hong Kong’s Hang Seng fell 0.5% to 16,633.37, while the Shanghai Composite gained 1.4% to 3,062.73. Elsewhere in Asia, Taiwan’s Taiex fell 1% and India’s Sensex fell 1% as the country prepared for a long national election process.
Monday’s pullback followed a decline Friday on Wall Street after a mixed start to the earnings season.
YOU&OP 500 fell 1.5% on Friday to 5,123.41, closing out its worst week since October when a big rally on Wall Street began. The Dow Jones Industrial Average fell 1.2% to 37,983.24, and the Nasdaq Composite fell 1.6% from the record set the previous day to 16,175.09.
JPMorgan Chase was one of the market’s heaviest hitters and sank 6.5% despite reporting stronger earnings in the first three months of the year than analysts expected. The country’s largest bank offered a forecast for a major source of revenue this year that fell short of Wall Street’s estimate, predicting only modest growth.
The pressure is always on companies to produce higher profits. But it’s particularly acute now given concerns that the other main lever that sets stock prices, interest rates, may not provide much of a boost in the near term.
A series of reports this year have shown that both inflation and the broader economy remain hotter than expected. That has forced investors to scale back forecasts for how many times the Federal Reserve might cut its key interest rate this year. Traders are largely betting on just two cuts, according to CME Group data, down from forecasts of at least six at the start of the year.
US stock indexes have already reached record highs, in part due to expectations of such cuts. Without easier interest rates, companies will have to produce higher profits to justify their stock prices, which critics say look too expensive by several measures.
At the same time, Treasury yields in the bond market sank and the price of gold rose, which is typical when investors are flocking to investments considered safer.
The 10-year Treasury yield fell to 4.51% from 4.58% on Thursday.
Adding to the jitters was a preliminary report that suggested sentiment among North American consumers is sinking. It’s an important update because U.S. consumer spending is the main driver of the economy.
Perhaps most worryingly, US consumers may be becoming more pessimistic about inflation. Its forecasts for inflation over the next 12 months reached the highest level since December. Such expectations could trigger a self-fulfilling prophecy, where purchases designed to overcome higher prices would only inflame inflation.
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