Hang Seng Index, ASX 200, Nikkei 225 Index: Crude Oil and the Middle East in the Spotlight

Key Insights:

• The ASX 200 led Hang Seng and Nikkei into negative territory on Friday.
• 10-year US Treasury yields reached a high of 5.001%, affecting assets.
• Monday’s session hinged on Middle East concerns, oil prices, and yields.

Overview of the Friday Session

On Friday, the ASX 200 led the Hang Seng Index and the Nikkei into negative territory. Despite Thursday’s US economic indicators and a dovish speech from Fed Chair Powell, demand for riskier assets remained subdued.

10-year US Treasury yields rose to a Thursday high of 4.996%, weighing on riskier assets. US initial jobless claims fell below 200k, supporting a higher for longer Fed rate path.

Concerns over an escalation in the Middle East conflict contributed to the negative mood. Fear of an escalation grew when news broke that President Joe Biden was planning to request funds from Congress to aid Ukraine and Israel in their conflicts.

Prolonged Middle East conflict could lead to higher oil prices, which may prompt central banks to raise rates to counter inflation.

On Thursday, the Nasdaq Composite Index fell by 0.96%. The S&P 500 and Dow saw losses of 0.85% and 0.75%, respectively.

10-year US Treasury yields rose higher on Friday, reaching 5.001% before retreating. Investors responded to the spike in yields. On Friday, inflation numbers from Japan raised questions about the BoJ and its ultra-loose monetary policy stance, adding to the negative mood.

The Monday Session: Middle East, Oil Prices, and Yields

On Friday, fears of an escalation in the Middle East conflict impacted the US equity markets. There were no US economic indicators to distract the US markets on Friday or set the tone for the Monday session.

On Friday, the Nasdaq Composite Index and S&P 500 ended the day with losses of 1.53% and 1.26%. The Dow declined by 0.86%.

There are no Asian economic indicators for investors to consider on Monday. The lack of stats will leave the Friday losses across the US equity markets to influence market risk appetite.

News updates from the Middle East will likely further impact market risk sentiment. The involvement of the US and further strikes on Gaza may raise the threat of regional conflict. Investors should monitor crude oil prices and government bond yields.

An upswing in crude oil prices would reflect a more negative view of the Middle East conflict and the possible effects on the global economy.

In the Futures Markets, the ASX 200 and the Nikkei 225 were down 52 points and 220 points, respectively. The Hong Kong markets are closed for Chung Yeung Day.

ASX 200

The ASX 200 slid by 1.16% on Friday. Rising Treasury yields continued to impact tech stocks. The S&P/ASX All Technology Index (XTX) declined by 1.21%. Mining stocks and the big four banks were a drag.

The National Australia Bank (NAB) and ANZ Group (ANZ) ended the session down 1.61% and 1.40%. Westpac Banking Corp (WBC) and the Commonwealth Bank of Australia (CBA) fell by 1.37% and 1.03%.

Mining stocks joined the broader market in the red. Fortescue Metals Group (FMG) and BHP Group Ltd (BHP) slid by 2.19% and 1.77%. Rio Tinto (RIO) and Newcrest Mining (NCM) saw losses of 0.74% and 1.31%.

Oil stocks had another mixed session. Woodside Energy Group (WDS) fell by 1.37%, while Santos Ltd (STO) gained 1.91%. Sales revenue and production figures fueled the buying appetite for Santos Ltd stocks.

Hang Seng Index

On Friday, the Hang Seng Index fell by 0.72%.

Alibaba Group Holding Ltd (HK:9988) and Tencent Holdings Ltd (HK:0700) ended the day down 0.82% and 0.76%.

Bank stocks had a mixed session. HSBC Holdings PLC (HK:0005) and the Industrial and Commercial Bank of China (HK:1398) declined by 1.56% and 0.79%. However, China Construction Bank (HK:0939) ended the Friday session flat.

Nikkei 225

(Graph for reference purposes only)

The Nikkei ended the Friday session with a 0.54% loss.

Bank stocks Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) fell by 1.06% and 0.26%. The main components of the Nikkei also ended the day in negative territory.

SoftBank Group Corp. (9984) declined by 2.04%. Fast Retailing Co (9983) and KDDI Corp. (9433) ended the day down 1.51% and 1.02%. Tokyo Electron Limited (8035) and Sony Corp. (6758) saw modest losses of 0.47% and 0.67%, respectively.

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