Asian Stocks Retreat as Middle East Tensions Persist, Nikkei Slumps
Concerns over Middle East tensions weigh on Asian stocks
Most Asian stocks retreated on Monday as concerns over the Israel-Hamas war kept risk sentiment weak, with Japan’s Nikkei index leading losses amid jitters before key inflation data this week.
Markets remained on edge over the Israel-Hamas conflict’s potential spillover into the broader Middle East region, as Israel prepared for a ground assault on the Gaza strip. However, U.S. Secretary of State Antonty Blinken reassured that Arab states did not want a further escalation of the conflict.
Risk appetite remained weak due to fears of rising U.S. interest rates following a stronger-than-expected inflation reading last week.
Japan’s Nikkei suffers profit taking and tech rout
The Nikkei index was the worst performer among its peers on Monday, sliding 1.9% with tech stocks bearing the brunt of selling.
Last week, the index had experienced a strong run-up, driven by expectations of a dovish Bank of Japan and the relative strength of Japanese firms, which attracted a wave of foreign buyers.
However, worsening risk appetite prompted investors to lock in recent profits, with tech stocks experiencing the largest degree of selling. The market also feared the impact of higher U.S. interest rates.
Investors also turned cautious on Japan ahead of key inflation data for September, scheduled for release later this week. Any signs of persistent inflation could give the Bank of Japan more impetus to tighten policy.
Broader Asian markets retreat
Broader Asian markets also retreated, with South Korea’s I shedding 1% and Australia’s falling 0.2%.
Futures for India’s index pointed to a positive open, especially after data last week showed consumer inflation easing in September. Additional data from India is due later today.
Chinese stocks subdued ahead of GDP and rate decision
China’s and indexes fell 0.6% and 0.4% respectively, while Hong Kong’s index lost 0.1%.
Market sentiment towards China remained cautious ahead of the release of key third-quarter GDP data later this week, which is expected to show continued weakness in growth.
The People’s Bank of China is also set to decide on its key rate later in the week, although a change seems unlikely after the bank recently kept its medium-term loan rates unchanged.
State media mentioned that more rate cuts by the People’s Bank of China were still possible this year, given the substantial slowdown in economic growth despite the lifting of anti-COVID measures. Earlier data released in October also painted a gloomy picture of Asia’s largest economy.
