HONG KONG (AP) – Asian stocks tumbled Monday as concerns about a possible escalation in tensions in the Middle East spooked financial markets and prompted investors to look for safer places for their money.
Despite heightened tensions in the Middle East region, late Saturday's attack marks Iran's first military attack on Israel despite decades of hostility between Iran since the 1979 Islamic Revolution. rose, and oil prices fell.
Benchmark U.S. crude oil fell 52 cents a barrel to $85.14 a barrel. Brent crude oil, the international standard, fell 48 cents to $89.97. Prices are being held down by slowing demand from China and forecasts that supply growth will outpace demand.
“While the drone attack has grabbed headlines, the immediate impact on global markets, particularly oil prices and inflation concerns, is likely to be muted,” Stephen Innes, managing partner at SPI Asset Management, said in a commentary. . “The precision and limited lethality of Iran's response suggests a strategic approach aimed at minimizing damage rather than escalating tensions.”
Japan's benchmark Nikkei 225 fell 0.7% to 39,232.80.
In currency trading, the U.S. dollar rose to 153.81 yen from 153.07 yen, another 34-year high, as investors moved to traditional haven currencies. The euro rose to $1.0663 from $1.0635.
Australia's S&P/ASX 200 index fell 0.4% to 7,754.50. South Korea's Kospi fell 0.4% to 2,671.19.
Hong Kong's Hang Seng Index fell 0.6% to 16,619.67, while the Shanghai Composite Index rose 0.8% to 3,044.49. Elsewhere in Asia, Taiwan's Tyex fell 1.4% and India's Sensex fell 0.7% as they prepared for long national elections.
Wall Street's decline on Monday followed Friday's decline after a mixed start to earnings season.
On Friday, the S&P 500 index fell 1.5% to 5,123.41, ending its worst week since October, when Wall Street's massive stock rally began. The Dow Jones Industrial Average fell 1.2% to $37,983.24, and the Nasdaq Composite fell 1.6% from its all-time high set the day before to $16,175.09.
JPMorgan Chase & Co., one of the most heavily weighted stocks on the market, has fallen 6.5% in the first three months of the year even though it reported stronger profits than analysts expected. The nation's largest banks said their main source of revenue will grow only slowly this year, below Wall Street expectations.
Companies are under constant pressure to generate greater profits. But it's especially acute now given concerns that interest rates, another key determinant of stock prices, won't move much higher in the near term.
A series of reports since the start of this year have shown that both inflation and the overall economy remain in worse shape than expected. That has forced traders to scale back their expectations for how many times the U.S. Federal Reserve may cut its key interest rates this year. Traders are primarily betting on just two rate cuts, down from at least six expected rate cuts at the start of the year, according to CME Group data.
Partly due to expectations for interest rate cuts, U.S. stock indexes were already breaking records. If interest rates are not eased, companies will need to generate higher profits to justify their stock prices, which critics say are too high by many measures.
At the same time, bond markets saw yields on U.S. Treasuries fall and the price of gold rise, a phenomenon that often occurs when investors flock to investments deemed safer.
The yield on the 10-year U.S. Treasury note fell to 4.55% on Monday from 4.58% late Monday.
Preliminary reports suggesting that US consumer sentiment is weakening also added to the tension. This is an important update because spending by U.S. consumers is the main driver of the economy.
Perhaps more concerning is that U.S. consumers may become more pessimistic about inflation. The outlook for inflation over the next 12 months is the highest since December. Such expectations can create a self-fulfilling prophecy in which purchases intended to anticipate price increases will only fuel inflation.
