Asian stocks rebounded on Thursday and oil edged up as the United States and Iran backed away from the brink of further conflict in the Middle East and investors unwound safety plays.
- MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1%.
- Hong Kong’s Hang Seng .HSI and Shanghai blue chips .CSI300, reversing Wednesday’s losses.
- Japan’s Nikkei .N225 rose 1.8%, lifting stocks to their highest for the year so far, while Australian stocks .AXJO climbed 1% to just below December’s record high.
- Australian stocks rose 0.8% to a record closing high.
- S&P 500 futures up 0.2% and German DAX futures 0.9% higher.
Oil is cheaper than it was before the killing of the Iranian commander, Qassem Soleimani, in Baghdad, a strike that raised fears of an escalating regional conflict.
- Brent futures prices steadied at $65.41 per barrel, about where they began the year.
Gold gave back sharp gains made on Wednesday but remains dearer than before Soleimani’s death, in an indication that investors’ fears have not completely evaporated.
It drifted lower to $1,544.80 per ounce
SANCTIONS NOT STRIKES
Iran fired missiles at military bases housing U.S. troops in Iraq on Wednesday in response to Soleimani’s killing. But Trump said no Americans were hurt and made no direct threats of a military response in an address to the nation on Wednesday.
“Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world,” he said. He announced economic sanctions on Iran without giving details.
Iranian Foreign Minister Mohammad Javad Zarif had earlier said the strikes “concluded” Tehran’s response to the killing of Soleimani.
Outside equities, U.S. Treasuries, which had soared in the flight to safety a day ago also settled back, with yields on the benchmark 10-year U.S. Treasury note at 1.8685%, after dropping as low as 1.705%.
Risk appetite was also evident in currency markets, with China’s trade-exposed yuan standing at a five-month high of 6.9281 per dollar and the Aussie creeping higher.
“All is well – so says Trump! That is the mood today,” said Bank of Singapore currency strategist Moh Siong Sim, a reference to Wednesday’s upbeat tweet from the president.
“I think that neither side wants to have a further escalation in tension, and both parties seem to be standing down.”