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Asia stocks mostly down after Syria strike

Asia stocks mostly down after Syria strike

HONG KONG, Apr 16: Most Asian markets fell on Monday after a US-led strike on Syrian targets fuelled fresh concerns over the tinderbox Middle East, though analysts said investors were hopeful the crisis would not escalate, reports AFP. The US, Britain and France carried out attacks at the weekend on alleged chemical weapons facilities, in response to what they say was a toxic gas attack by the Russia-backed Assad regime a week before. While there was broad support for the mission, Moscow condemned it as illegal and warned it would provoke “chaos” in international relations. The Syria crisis, which has seen the West’s relationship with Russia grow increasingly frosty, has encompassed other regional players including Iran, Saudi Arabia and Israel, and led to talk of a military standoff. It also comes against the backdrop of a trade dispute between the United States and China. Many fear this could hammer the global economy if the two sides push through threatened tit-for-tat tariffs on billions of dollars’ worth of goods. Most markets were down on Monday but the losses were limited. Hong Kong fell 1.7 percent in the afternoon, while Shanghai had slipped 1.5 percent at the close, with traders there awaiting the release Tuesday of first-quarter Chinese growth data. Property firms in Hong Kong took a hit on fears of an end to the era of low interest rates as the city’s de facto central bank is forced to support the local dollar, which is at the lowest end of its band with the greenback. The Hong Kong Monetary Authority has spent more than US$1 billion boosting the currency, which has been hit by a flow of cash out of the city to the United States in search of higher interest rates. Chang Liu, China economist at Capital Economics, warned there was a concern that the HKMA’s move would raise interest rates in the city, which could hammer the property market—among the world’s most expensive—and have a knock-on effect for the economy. Singapore fell 0.2 percent, while Wellington and Taipei also declined. Tokyo stocks gained ground on Monday as investors forecast that US-led strikes on Syria would have limited impact. The benchmark Nikkei 225 index rose 0.26 percent or 56.79 points to close at 21,835.53 while the broader Topix was up 0.40 percent or 6.86 points at 1,736.22. The dollar firmed to 107.48 yen Monday from 107.35 yen in New York Friday afternoon before the announcement of a wave of Western strikes against Syria’s regime. A lower yen is positive for Japanese exports as it inflates their earnings abroad. The strikes “have thus far drawn only verbal condemnation from Russia with Russia’s prediction of ‘global chaos’ if the West hits Syria again not filling markets with fresh dread”, Ray Attrill, head of currency strategy at National Australia Bank, said in a client note. US, French and British missiles destroyed sites suspected of hosting chemical weapons development and storage facilities on the weekend, but the buildings were mostly empty and the Western allies swiftly reverted to diplomatic efforts. Russian President Vladimir Putin, the Syrian regime’s top ally, warned that fresh strikes would spark “chaos”, but Washington vowed economic sanctions against Moscow rather than further military action. “There are no signs of a further escalation in bilateral (Russia-US) tensions,” said SMBC Nikko chief economist Yoshimasa Maruyama. “Chances are that the future Syrian situation will show a similar development to that of April 2017,” he said in a commentary, noting market reactions to the US missile attacks at that time were only temporary. In Tokyo trade, Canon rose 0.23 percent to 3,874 yen and Sony gained 1.18 percent to 5,307 yen. Sydney edged up 0.2 percent and Seoul 0.1 percent. “The markets are taking the surgical strike at the heart of Syria’s chemical weapon programme in their stride as traders had priced in this outcome with a high degree of probability,” Stephen Innes, head of Asia-Pacific trade at OANDA, said in a note. “Given the universal condemnation (of the chemical attack) and overwhelming support for this military action, it’s improbable there will be retaliation from Russia or Iran, Syria’s principal backers, and for the time being, the US-UK-France alliance is considering this a mission accomplished.” And Callum Henderson, a Eurasia Group managing director in Singapore, told Bloomberg TV: “There was a significant fear of potential escalation: that hasn’t happened so far.” But he added that “it remains to be seen how long this market rally lasts on the back of this specific factor—whether or not, or when, Russia retaliates”. The troubles in the oil-rich Middle East have helped push the price of crude to highs not seen since the end of 2014, though both main contracts slipped in early trade Monday. And the dollar managed to hold its own against the safe haven yen despite the uncertainty, while gold—another go-to asset in times of turmoil—is sitting near two-year highs. In early European trade London was flat and Frankfurt rose 0.4 percent. US stock index futures rose on Monday as investors bet the weekend’s U.S.-led missile attack on Syria would not escalate into a broader conflict, while turning their focus to the earnings season. Saturday’s strikes marked the biggest intervention by Western countries against Syrian President Bashar al-Assad and his ally Russia, which is facing further economic sanctions over its role in the conflict. “The action was well-received ... and that’s giving a chance for investors to focus on macro news and earnings,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “It’s not going to be a negative unless it turns into a bigger conflict. It’s going to be a day where the market is going to attempt to move a bit higher.” Shares of Bank of America rose 0.84 percent in premarket trading after the lender reported a better-than-expected increase in quarterly profit. Shares of JPMorgan, Wells Fargo and Citigroup, all of which reported on Friday, were also higher. Analysts are expecting the S&P 500 companies to record an 18.6 percent rise in profit, their strongest earnings growth in seven years However, many traders say that reactions to results could be muted as market participants have already priced in gains from corporate tax cuts, reflected in the stock market’s strong rally in 2017 and early 2018. At 8:44 a.m. ET, Dow e-minis 1YMc1 were up 158 points, or 0.65 percent. S&P 500 e-minis ESc1 rose 16.25 points, or 0.61 percent and Nasdaq 100 e-minis NQc1 gained 41.75 points, or 0.63 percent. Waning fears of a broader conflict in Syria pushed short-dated U.S. Treasury yields to their highest level in almost a decade, while crude oil prices eased due to a rise in U.S. drilling activity. “We’re seeing a little bit of an uptick in yields and pullback in oil, and those are likely to constrain any strong reaction to earnings and macro news,” said Cardillo. Data on Monday showed U.S. retail sales increased more than expected in March, rising after three straight monthly declines, as households boosted purchases of motor vehicles and other big-ticket items. Shares of Netflix, which is expected to report results after market close on Monday, rose 1.44 percent.

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