Asian markets cautious amid Middle East tensions

Asian markets opened cautiously on Monday, with the Nikkei plunging due to concerns about Japan’s new prime minister’s stance on interest rates. Meanwhile, China’s stimulus measures and a weaker dollar supported regional markets.

In the Middle East, ongoing Israeli strikes in Lebanon added geopolitical uncertainty, while oil prices remained relatively stable amidst potential supply increases.

The upcoming week is packed with important economic data in the United States, including the payrolls report, which could significantly influence the Federal Reserve’s decision on interest rates.

The Nikkei index experienced a sharp decline of 4.6 per cent as investors awaited clarity from the new Prime Minister Shigeru Ishiba on his monetary policy stance.

However, Ishiba’s recent conciliatory remarks regarding the Bank of Japan’s accommodative policies helped stabilise the yen.

The rally in China lifted the MSCI’s broadest index of Asia-Pacific shares outside Japan by 0.8 per cent, following a strong 6.1 per cent surge last week. Wall Street also witnessed a positive week, driven by the benign reading on core US inflation.

Futures markets are currently implying a 55 per cent probability of a 50-basis-point rate cut by the Federal Reserve on November 7. However, the presidential election scheduled for two days earlier introduces uncertainty.

Several Fed speakers will be making statements this week, including Chair Jerome Powell, along with the release of job openings, private hiring data, and ISM surveys on manufacturing and services.

In currency markets, the dollar index remained relatively stable, while the euro gained ground following the positive US inflation report. The euro zone is set to release inflation figures, producer prices, and unemployment data this week.

Gold prices reached record highs, supported by a weaker dollar and lower bond yields. Oil prices rose slightly amid Middle East tensions, offsetting concerns about potential supply increases from Saudi Arabia.

Attribution: Reuters

Subediting: M. S. Salama