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Markets Update: Global Markets Respond to Geopolitical Tensions: APAC Stocks Decline Amid Israel-Hamas Conflict Concerns.
Economic Calendar
Global Markets Roundup: 16 Oct 2023
On Monday, October 16, 2023, Asia-Pacific stocks faced a predominantly downward trend, influenced by escalating geopolitical tensions centered around the Israel-Hamas conflict. The conflict raised fears of potential spillover effects on neighboring nations, contributing to the market's cautious sentiment.
An Israeli military spokesperson emphasized their strategic objective to completely dismantle the governing and military capabilities of Hamas, adding to the geopolitical uncertainty. Simultaneously, Iran's Foreign Minister issued a warning, stating, "If the Zionist aggressions do not cease, the hands of all parties in the region are on the trigger," further intensifying the geopolitical backdrop.
In the European markets, equity futures signaled a subdued start, with the Euro Stoxx 50 future showing a modest uptick of 0.1%. This followed a 1.5% decline in the cash market on the preceding Friday.
The U.S. Dollar Index (DXY) maintained a position just above the 106.50 mark, while the EUR/USD found support at 1.05. Notably, the New Zealand Dollar (NZD) exhibited resilience and outperformed, particularly in the aftermath of local elections.
The ASX 200 displayed a subdued performance on Monday, marked by underperformance in the technology, telecommunications, and industrials sectors. However, losses in these segments were mitigated by the resilience demonstrated by commodity-related industries. The Nikkei 225 experienced underwhelming performance as it dipped below the critical 32,000 level, with no discernible fresh catalysts to drive market momentum.
In the Greater China region, the Hang Seng and Shanghai Composite indices demonstrated varied price action. The Hong Kong benchmark exhibited choppiness, while the mainland counterpart faced downward pressure. Market participants grappled with recent developments, including the People's Bank of China's decision to maintain the 1-year Medium-Term Lending Facility (MLF) rate, aligning with expectations. Noteworthy was the largest net injection of MLF since December 2020.
China's markets absorbed the impact of two significant developments. Firstly, it was confirmed that the United States would take measures to prevent American chipmakers from selling artificial intelligence (AI) chips to China that bypass government restrictions. Secondly,
China's securities regulator announced plans to restrict securities lending, a move interpreted by local press as a measure to bolster market stability by tightening rules for short selling. Investors navigated these nuanced dynamics, weighing sector-specific performances against broader geopolitical factors to inform their strategic positions in the market.
**Foreign Exchange (FX):**
The Dollar Index (DXY) exhibited a stable performance, trading within a narrow range. The weekend brought minimal news flow from the US, and market attention turned to uncertainties surrounding House Speaker nominee Jim Jordan's vote on Tuesday. EUR/USD maintained a buoyant stance, recovering from last Friday's support at the 1.0500 level. However, gains were tempered following restrained comments over the weekend from ECB's Lagarde and Nagel, which offered little impetus for significant price movements. GBP/USD sought to recover from the previous week's selling pressure. BoE Governor Bailey's comments acknowledging the perplexing persistence of pay growth while noting recent improvements in inflation contributed to the cable's attempts at reclaiming losses.
USD/JPY displayed indecision, oscillating around the 149.50 level and residing close to what is considered the 'intervention threshold.' Antipodeans exhibited strength, notably with NZD/USD leading advances after a rightward shift in the Saturday election, positioning National Party leader Luxon to become New Zealand's next Prime Minister. The People's Bank of China (PBoC) set the USD/CNY mid-point at 7.1798, surpassing expectations of 7.3121 (previous 7.1775).
**Fixed Income:**
10-year US Treasury (UST) futures marginally retreated following Friday's haven bid, prompted by concerns of a potential ground invasion of Gaza, which, although not imminent, is anticipated in the near future. There are also apprehensions about the conflict expanding beyond Israel's borders. Bund futures experienced slight downward pressure, but downside was contained in the absence of major catalysts from the European bloc. 10-year Japanese Government Bond (JGB) futures traded within a range, supported by the Bank of Japan's involvement in the market, purchasing nearly JPY 1.7 trillion of JGBs on top of its routine fixed-rate operations.
**Commodities:**
Crude oil futures paused, taking a breather after Friday's surge driven by geopolitical developments. Spot gold witnessed a minor pullback but maintained a position above USD 1,900/oz following recent safe-haven demand. Copper futures sustained a rebound from last week's lows, demonstrating resilience despite prevailing risk aversion in the market.
Looking ahead, key events on the financial horizon include the New York Federal Reserve Manufacturing data, New Zealand Consumer Price Index (CPI) release, speeches by Philadelphia Fed President Harker and ECB President Lagarde, along with corporate earnings reports from Charles Schwab Corp. on the docket.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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