Kevin Buckland
TOKYO (Reuters) – Asian shares fell on Wednesday, catching up with selling on Wall Street after Iran’s ballistic missile attack on Israel raised the risk of supply disruptions and sparked concerns of escalating regional conflicts.
Investors flocked to safer assets, which pushed U.S. Treasury yields lower by Asian time and pushed gold prices near record highs.
The safe-haven dollar traded close to its highest level in three weeks against the euro. Macroeconomics also supported the dollar, with the U.S. job market urging the Federal Reserve (Fed) to scale back its interest rate cuts in November and euro zone inflation trends supporting the European Central Bank (ECB)’s interest rate cut this month.
It was down 1.5% as of 0022 GMT, with South Korea down 1.3% and the Australian benchmark down 0.3%.
The largest MSCI Asia-Pacific index fell about 0.5%.
Hong Kong is not yet open after Tuesday’s holiday. Markets in mainland China are closed for a week for the Golden Week holiday. The typhoon disrupted trade with Taiwan.
U.S. stock index futures fell 0.16% after the spot index fell 0.9% overnight.
“In the chain of potential market volatility shocks, geopolitics typically trumps the economy, corporate earnings and central bank responses, which leaves most market participants vulnerable to pricing the risks associated with these events,” said Chris Weston, head of research at Pepperstone. “Because I do it,” he said.
“These events generally correct the market in a positive way, but the tail risk they can pose is clearly significant,” Weston said. “The situation remains fluid, and any calming or increased aggression in rhetoric from Israel or Iran could have a significant impact on market sentiment.”
Iran said early Wednesday that its missile attacks against Israel had ended, with Israel and the United States promising retaliation but prohibiting further provocations.
Futures rose more than 1% to $74.33 a barrel, up 2.5% from Tuesday. U.S. WTI futures rose 1.3% to $70.73 a barrel after rising 2.4% on Tuesday.
Gold prices were down 0.16% at $2,658.63 an ounce, after rising more than 1% in the previous session and nearing a record high of $2,685.42 last month.
The benchmark 10-year Treasury yield fell 1.5 basis points to 3.7278%.
The exchange rate, which tracks the euro and five other major rivals against the U.S. currency, rose as high as 101.39 on Tuesday for the first time since Sept. 19 before remaining steady at 101.21.
Europe’s shared currency was little changed at $1.1070 after falling 0.6% in the previous session, falling to $1.1046 for the first time since September 12.
Euro area data on Tuesday showed inflation fell below the ECB’s 2% target last month, raising expectations of a quarter-point interest rate cut on October 17.
Meanwhile, US figures showed a strong economy, a day after Federal Reserve Chairman Jerome Powell spoke out against the possibility of another 50 basis point interest rate cut at next month’s central bank meeting.
Job postings rose unexpectedly in August after two consecutive months of declines, but hiring was sluggish and consistent with a slowing labor market.
Personal payrolls data is expected to be released later Wednesday ahead of potentially important monthly non-farm payrolls figures on Friday.
US politics will also be in focus as Democrat Tim Walz and Republican JD (NASDAQ:) Vance go head-to-head in Wednesday’s vice presidential debate.
