Stock Market Downturn as Sensex Falls: Asia’s Shares Hit Six-Week Low Amidst Middle East Tensions and Disappointing Bank Earnings
Equity markets across Asia, including benchmarks in Japan, South Korea, and Australia, experienced declines today, following Friday’s downturn in US equities. The drop comes amidst ongoing tensions in the Middle East, lackluster bank earnings, and speculation about the Federal Reserve’s stance on interest rates.
After the S&P 500 recorded its worst session since January on Friday, Hong Kong stock futures also dipped, reflecting a flight to safety sentiment among investors.
Despite an unprecedented attack on Israel over the weekend, global markets exhibited signs of stability. Iran indicated that the situation could be considered resolved, and US President Joe Biden reportedly assured Israeli Prime Minister Benjamin Netanyahu that the US would not support a retaliatory strike against Iran.
While most Group-of-10 currencies strengthened against the US dollar today and Treasury yields steadied, gold prices rose as demand for safe-haven assets increased. Additionally, aluminum and nickel prices surged following new sanctions imposed by the US and UK on Russian supplies.
Chinese equities are expected to face challenges this week following disappointing trade data released on Friday. Even with improvements in global risk sentiment and easing tensions in the Middle East, Chinese stocks may encounter obstacles, particularly as authorities potentially maintain key interest rates amidst maturing policy loans.
The escalation of the Middle East crisis adds to existing market concerns over inflation and the likelihood of prolonged higher interest rates. Many anticipate oil prices to exceed $100 per barrel amid the conflict, prompting investors to seek refuge in Treasuries, gold, and the US dollar, while anticipating further losses in stock markets.
Bitcoin rebounded today after experiencing an initial decline in the wake of the attacks. Saudi Arabia and Qatar’s stock markets recorded minor losses under thin trading volumes on Sunday, while Israel’s equity benchmark fluctuated before closing with a slight gain.
Although oil prices remained relatively stable despite the attacks, Brent crude has already surged nearly 20% this year, hovering around $90 per barrel.
As Wall Street’s earnings season begins, results from major banks like JPMorgan Chase & Co. and Wells Fargo & Co. highlighted the impact of persistent inflation and rising interest rates on the US economy. Citigroup Inc.’s profits, however, surpassed expectations, reflecting increased corporate financing activities and consumer credit card usage, suggesting that major banks may benefit from an extended period of elevated interest rates.
Traders are now turning their attention to upcoming economic data releases and key meetings such as the International Monetary Fund and World Bank spring meetings in Washington. This week, data on Chinese growth, as well as inflation readings from Japan, the Eurozone, and the UK, are anticipated to influence market sentiment and central bank policy decisions.