Investors react to geopolitical uncertainties and hints of potential U.S. rate cuts.
Asia-Pacific markets were mixed on Monday as tensions in the Middle East escalated, with Israel and Hezbollah exchanging strikes. At the same time, investors were digesting dovish remarks from U.S. Federal Reserve Chairman Jerome Powell regarding potential interest rate cuts.
Over the weekend, Israel’s Air Force launched strikes on Hezbollah targets in Lebanon, shortly before the Iran-backed militant group retaliated with over 320 rockets directed at Israel. Hezbollah stated that the attacks were in response to Israel’s assassination of Fuad Shukr, a senior commander, last month. Despite this, the group indicated it was not gearing up for further strikes, and Israel’s foreign minister expressed that Israel was not seeking a full-scale war, according to Reuters.
These developments in the Middle East caused a surge in oil prices, with Brent crude rising by 1% to $79.83 per barrel and U.S. West Texas Intermediate (WTI) crude also increasing by 1% to $75.63 per barrel.
Oil Prices Set For Weekly Decline Amid U.S. Demand Concerns & Easing Supply Fears
In Asia, Singapore’s manufacturing output exceeded expectations, growing by 10.1% month-on-month in July. This marked a sharp reversal from the revised 4.3% decline in June and outperformed predictions of a 5.3% increase. On a year-over-year basis, Singapore’s manufacturing output rose 1.8%, beating the forecasted 1.1% decline.
Japan’s Nikkei 225 index fell by 0.66% to close at 38,110.22, while the broader Topix index lost 0.87%, ending at 2,661.41. The Japanese yen strengthened by 0.42%, trading at 143.5 against the dollar, marking its strongest level since the stock sell-off on August 5.
South Korea’s Kospi index saw a slight decline of 0.14% to end at 2,698.01, and the small-cap Kosdaq index dropped by 0.84% to 766.79, marking its fourth consecutive day of losses.
Conversely, Australia’s S&P/ASX 200 index gained 0.76%, finishing at 8,084.5, just 30 points shy of its all-time high.
In China, the Hong Kong Hang Seng index rose by 1.08%, while the mainland Chinese CSI 300 index saw a marginal decline of 0.11%.
Meanwhile, on Wall Street, all three major indexes rose on Friday following Powell’s comments. The Dow Jones Industrial Average increased by 1.14%, the Nasdaq Composite climbed by 1.47%, and the S&P 500 gained 1.15%.
During his speech in Jackson Hole, Wyoming, Powell hinted at potential cuts to the Federal Funds rate but did not specify the extent or the timing of these reductions. “The time has come for policy to adjust,” Powell stated. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Fed Chair Powell Announces Potential Rate Cuts, Aims For Economic Soft Landing
As investors continue to navigate these geopolitical and economic uncertainties, markets are expected to remain volatile in the coming days.
