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MARKET UPDATE

Yen weakening briefly to the 150-per-dollar.

Japan’s yen took the spotlight in Asia on Monday, weakening briefly to the 150-per-dollar level as investors betting on a further rise in dollar yields lost out to those expecting Japanese authorities will intervene in markets.

The risk of Israel’s war on the Islamist group Hamas becoming a wider regional conflict kept markets on edge, as Israeli air strikes battered Gaza early on Monday, and the United States dispatched more military assets to the region.

U.S. Treasuries were subdued as investors hunkered down for a European Central Bank meeting and U.S. GDP data later in the week.

Ten-year yields were around 4.98%, having briefly popped above 5% last week after Federal Reserve Chair Jerome Powell said the U.S. economy’s strength and hot labour markets might warrant tighter financial conditions. The dollar index added 0.1% to 106.28, with the euro down 0.2% at $1.0574.

The Japanese yen last traded at 149.93 per dollar, after briefly easing early on Monday to 150.14, a level last seen on Oct. 3 when traders had suspected the Bank of Japan (BOJ) intervened to nudge it to the stronger side of 150.

 

Asia shares slip on Middle East woes.

Asian shares hit one-year lows Monday as the risk of a wider conflict in the Middle East clouded sentiment in a week laden with data on U.S. growth and inflation as well as earnings from some of the world’s largest tech companies.

The recent surge in bond yields has tightened monetary conditions without the central banks having to do anything, allowing the Federal Reserve to signal it will likely stay on hold at its policy meeting next week.

Indeed, futures imply around a 70% chance the Fed is done tightening for this cycle and are flirting with the chance of rate cuts from May next year.

The jump in yields has challenged equity valuations and dragged most of the major indices lower last week, while the VIX ‘fear index’ of U.S. stock market volatility hit its highest since March.

On Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.5% to its lowest in almost a year. China’s blue-chip index lost 0.6% to its weakest since early 2019.

 

Oil eases as aid convoys arrive in Gaza Strip.

Oil prices slid more than $1 on Monday as diplomatic efforts grew over the weekend to contain the conflict between Israel and the Palestinian Islamist group Hamas, although Gaza continued to be bombarded.

Brent crude futures fell 79 cents to $91.37 a barrel, as of 0410 GMT, having lost $1.02 to $91.14 a barrel earlier in the session. U.S. West Texas Intermediate crude futures were down 91 cents at $87.17 a barrel, after sliding $1.72 to $87.03 a barrel earlier on Monday.

The contracts had risen more than 1% last week for a second consecutive weekly jump on fear of potential supply disruption if the Israel-Hamas war grows into a wider confrontation in the Middle East, the world’s biggest oil-supplying region.

Aid convoys started to arrive in the Gaza Strip from Egypt over the weekend, as Arab leaders and foreign ministers gathered for a summit in Cairo which was unable to yield a joint statement.

 

 

 

 

 

 

 

 

 

 

 

 

 

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