TOKYO - Asian shares and bond yields sank on April 19 while safe haven currencies, gold and crude oil jumped after reports of a sharp escalation in Middle East hostilities.
MSCI’s broadest index of Asia-Pacific shares dived 2.3 per cent immediately after the news, while US stock futures pointed 1.5 per cent lower following media reports Israeli missiles had hit a site in Iran.
Markets in the region later pared their losses as they awaited more confirmed news.
Singapore’s Straits Times Index, which earlier fell by more than 1 per cent, was down 0.6 per cent at the midday trading break. Shares of Singapore Airlines, among the worst hit, were down 0.9 per cent at $6.23 cents, after falling 1.6 per cent earlier.
Japan’s Nikkei index dropped 2.4 per cent, after earlier plunging 3.3 per cent. South Korea’s Kospi index slid 1.7 per cent, while Hong Kong’s Hang Seng Index was down 1.2 per cent. Australia’s S&P/ASX 200 lost 1.2 per cent.
US long-term Treasury yields dropped as much as 13.5 basis points to 4.512 per cent. The safe-haven yen rallied about 0.4 per cent against the US dollar and 0.7 per cent versus the euro while the Swiss franc rallied about 0.9 per cent versus the dollar.
Gold jumped 1.3 per cent to US$2,409.45, heading back toward last week’s all-time high of US$2,431.29.
Brent futures surged more than 3 per cent on concerns Middle East supply could be disrupted.
ABC News cited a US official in reporting Israeli missiles had hit a site in Iran, while Iran’s Fars news agency said explosions were heard at an airport in the city of Isafahan.
Israeli Prime Minister Benjamin Netanyahu had vowed retaliation earlier this week after Iran launched hundreds of drones and missiles in an unprecedented direct attack on Israel over the weekend.
That, in turn, was in response to a suspected Israeli strike on its embassy compound in Syria that killed senior Iranian military commanders.
“We’ve seen a massive risk-off move,” said ANZ head of Asia research Khoon Goh.
“Markets will be very worried that this is the start of a tit-for-tat escalation which could create huge volatility in the Middle East.”
Equity markets were already heading lower before the Middle East headlines, as more robust US economic data spurred additional US Federal Reserve officials to signal no rush to lower interest rates.
Chip sector stocks were hit particularly hard by both the outlook for protracted tight monetary policy and investor disappointment at Taiwan Semiconductor Manufacturing Co’s decision to leave capital spending plans unchanged.
“A triple whammy of sorts for the markets, as Fed’s hawkishness keeps taking a leg up with each passing day and semiconductor earnings have so far fallen short,” said Saxo head of currency strategy Charu Chanana.
“Risk sentiment could remain weak as we await more details on damages and casualties.” REUTERS
