Hong Kong (AFP) – Asian stocks were mixed and oil prices edged up as reports indicated that the United States and Iran had agreed to stop attacking each other following a weekend of strikes that threw their fragile truce into question. Investor confidence remains shaky after last week’s rollercoaster ride that saw markets whipsaw on the Middle East crisis and growing concerns about a tech bubble fueled by the AI boom.
While there is an expectation that Washington and Tehran will finalize a deal to end their conflict and reopen the Strait of Hormuz, the process has been fraught with tensions between the long-time foes. The two have traded strikes in recent days, disrupting shipping through the vital waterway and fanning concerns that Iran will shut it down again. The US Central Command stated it had attacked 10 Iranian military targets over “continued Iranian aggression against commercial shipping.” Iran, in turn, said it retaliated with strikes against US bases in Kuwait and Bahrain, which both Kuwait and Bahrain denounced.
Tehran has been angered by Oman’s announcement of an alternative route through the strait that hugged the Omani shoreline, reported to be in conjunction with the International Maritime Organization. Iran insists on controlling passage through the vital strait, something it did not enjoy before the war. Both countries reportedly agreed to stop attacking each other, as stated by US media outlets citing senior US officials, and plan to meet Tuesday in Qatar for further discussions.
US President Donald Trump has reiterated past threats of military action if the Iranian strikes continue, stating on Saturday that Iran would “no longer exist” if the US is “forced” to resume the war. Iran’s top diplomat warned Sunday that any attempt by ships to bypass its preferred route would “increase tensions.” A US official noted that technical talks are slated to continue on all areas of the memorandum of understanding, with both sides standing down for now and allowing vessels to move freely in and around the strait.
Oil prices, which last week fell to pre-war levels, rose on Monday, with West Texas Intermediate adding more than one percent. Equity markets fluctuated, with Hong Kong, Sydney, Wellington, Taipei, and Manila showing gains, while Tokyo, Seoul, Shanghai, Singapore, and Jakarta saw declines. Tech firms were again in the spotlight after leading hefty losses last week, with South Korean chip makers SK Hynix and Samsung feeling the impact of the selling. The sector has been under pressure due to concerns that valuations have gone too far and uncertainty about when companies will see a return on the trillions pumped into AI.
The tech rally has driven Seoul, Tokyo, and Wall Street’s three main indexes to record highs this year, with SK Hynix alone soaring 300 percent in the first six months. The Bank for International Settlements, considered the central bank of central banks, warned Sunday of a possible bust following a long-running investment boom by companies eager to keep ahead in the AI race. “Disappointment in returns could trigger a sudden pullback in financing and turn the capex boom into a protracted investment bust, with potential knock-on effects on financial conditions,” it stated in its annual report.
Investors are looking ahead to the release of US jobs data, which could influence the Federal Reserve’s monetary policy plans. The bank has taken a more hawkish turn amid concerns over surging inflation exacerbated by the Iran war. “Last month, the strong data triggered a four percent sell-off on the Nasdaq, its worst single-day decline in over a year, as higher-for-longer fears weighed heavily on the AI trade,” commented IG market analyst Fabien Yip. “A repeat beat on Thursday could trigger a similar rotation; a miss, by contrast, may dampen hike expectations and lift rates-sensitive equities.”
– Key figures around 0230 GMT –
Seoul – Kospi: DOWN 1.9 percent at 8,254.35
Tokyo – Nikkei 225: DOWN 0.7 percent at 68,869.43
(break)
Hong Kong – Hang Seng Index: UP 1.7 percent at 23,048.81
Shanghai – Composite: UP 0.1 percent at 4,032.52
West Texas Intermediate: UP 1.1 percent at $70.00 a barrel
Brent North Sea Crude: UP 0.7 percent at $72.47 a barrel
Euro/dollar: UP at $1.1391 from $1.1388 on Friday
Pound/dollar: UP at $1.3208 from $1.3200
Dollar/yen: UP at 161.79 yen from 161.75 yen
Euro/pound: DOWN at 86.25 pence from 86.28 pence
New York – Dow: DOWN 0.1 percent at 51,876.11 (close)
London – FTSE 100: DOWN 0.2 percent at 10,508.02 (close)
© 2024 AFP
