Reported by Kimberley Kao
Asian equity markets experienced a slump on Thursday, with the downward trend mirroring the trajectory of U.S. futures. The market movements were primarily driven by investor apprehension regarding U.S. inflation and the potential intensification of tensions in the Middle East.
The Nikkei Stock Average in Japan saw a 0.8% decline, while the Kospi in South Korea dipped by 0.5%. Hong Kong’s Hang Seng Index fell by 0.95%, and the Shanghai Composite Index in China was down by 0.3%.
U.S. index-linked futures were also in a downtrend, with Dow, S&P 500, and Nasdaq futures dropping by 0.2% and 0.4% respectively.
On Wednesday, Federal Reserve Chairman Jerome Powell expressed confidence in the central bank’s ability to navigate the unpredictable economic landscape, despite admitting to limited foresight.
While the Fed’s decision to maintain the status quo was anticipated, Vishnu Varathan of Mizuho Securities noted a shift in Fed member’s expectations for fewer rate cuts this year, indicating a persistent sense of uncertainty.
Despite these projections, Varathan suggested that markets are more perturbed by geopolitical issues rather than the Fed’s decision.
“Headline-driven instincts for risk re-pricing will likely overshadow Fed nuances due to the current Iran-Israel conflict,” he stated.
Meanwhile, WTI crude oil futures were marginally lower at $75.09 a barrel, and Brent crude futures fell 0.4% to $76.40 a barrel. Yet, the overall trend for oil prices remains bullish.
“Investors should brace themselves for volatility,” warned Priyanka Sachdeva, senior market analyst at Phillip Nova.
Bitcoin, often seen as a barometer for risk, rose by 0.2%, while spot gold was up by 0.2% at $3,377.11 a troy ounce.
Goldman Sachs analysts highlighted increased oil shipping rates due to heightened Middle Eastern risks. They further projected a higher likelihood of U.S. military action against Iran over a nuclear deal, suggesting that oil markets are likely to experience elevated prices in the coming months.
