(Bloomberg) — Stocks in Asia rose on Monday as investors shifted their focus to news closer to home following a weekend dominated by an escalating conflict between Israel and Iran.
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Better sentiment in Japan and a positive data surprise in mainland China were enough to encourage tentative buying across the region after a mixed start in early trading. Japan’s Nikkei 225 was 1% higher, while the Hang Seng China Enterprises Index reversed its early losses. US equity futures were also up, and a gauge of the dollar strengthened.
“It is too early to tell if Asia’s markets can completely look through this rapidly evolving conflict that still matters greatly for the region’s energy security,” said Homin Lee, senior macro strategist at Lombard Odier Singapore Ltd. “The muted response perhaps reflects some relief over the relatively calibrated nature of airstrikes on both sides.”
Stocks had tumbled on Friday as investors reacted to reports that Israel had launched airstrikes against Iran. A major concern is that the conflict leads to a prolonged disruption to the supply of oil. That could weigh on the global economy and potentially fuel a round of inflation just as many central banks pivot toward easing. Brent crude rose as much as 5.5% in early trading before paring most of its gain.
Treasury yields rose at most major maturities. The 10-year yield was up two basis points to 4.42%.
Japanese equities were helped by a mix of a weakening yen, which may boost companies with overseas revenues, and a rally in defense companies after reports that Japan and the EU would meet to discuss cooperation measures for the defense industry. The yen was around 0.2% weaker against the dollar.
Retail sales in China rose 6.4% in May, a much faster expansion than the estimated 4.9%. That figure came alongside a raft of data from the world’s second largest economy, which painted a mixed picture. But the surprise lifted sentiment, and helped Chinese stocks in Hong Kong move higher after earlier losses.
Still, few market watchers think the volatility is over as the conflict escalates and investors brace themselves for a busy week of central bank meetings. The Federal Reserve and the Bank of Japan are among a raft of monetary authorities set to announce interest rate decisions this week.
“Markets should be prepared for a prolonged period of uncertainty,” said Wolf von Rotberg, an equity strategist at Bank J. Safra Sarasin. “Hedging against potential oil supply-chain disruptions via exposure to the energy market and adding to gold, which may see an acceleration of its structural uptrend, are the best ways to protect a portfolio against a further escalation in the Middle East.”
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.2% as of 11:22 a.m. Tokyo time
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Nikkei 225 futures (OSE) rose 1% at 10:07 a.m. New York time, the most since June 9
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Japan’s Topix rose 0.6%, more than any closing gain since June 9
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Australia’s S&P/ASX 200 rose 0.3%
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Hong Kong’s Hang Seng was little changed
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The Shanghai Composite rose 0.2%
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Euro Stoxx 50 futures fell 0.3%, falling for the fourth straight day, the longest losing streak since June 2
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro fell 0.1% to $1.1535
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The Japanese yen fell 0.2% to 144.34 per dollar
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The offshore yuan was little changed at 7.1857 per dollar
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The euro fell 0.1% to $1.1535
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The British pound fell 0.1% to $1.3552
Cryptocurrencies
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Bitcoin strengthened 1.1% to $105,899.28, ending a five-day losing streak
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Ether strengthened 2.9% to $2,576.68, ending a four-day streak that saw a 11% decline
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.42%
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Australia’s 10-year yield advanced seven basis points, more than any closing advance since May 19
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Chris Bourke and Aya Wagatsuma.
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