Amid Middle East tension, oil prices continues to rise

Most Asian markets rose on Monday, buoyed by optimism surrounding the U.S. Federal Reserve’s significant interest rate cut and hopes for further stimulus measures from China.

However, oil prices saw an uptick due to escalating tensions in the Middle East, particularly after Hezbollah launched multiple rockets at Israel, raising concerns of broader conflict.

Key markets like Shanghai, Seoul, Singapore, Taipei, and Mumbai showed gains, while Hong Kong, Sydney, and Bangkok dipped. Sri Lanka’s stocks fell as the election of Marxist leader Anura Dissanayaka raised concerns about the country’s $2.9 billion International Monetary Fund bailout and impending austerity measures.

Fed Rate Cut and US Market Impact

The first rate reduction by the Federal Reserve since 2020 propelled the Dow Jones and S&P 500 to record highs, signaling positive market sentiment about a soft landing for the U.S. economy.

Despite this, U.S. investors were cautious on Friday, with a slight pullback expected after recent rallies.

China’s Economic Challenges and Stimulus Hopes

Asian traders remained optimistic despite weak Chinese economic data. China’s youth unemployment reached 18.8% in August, the highest this year, further highlighting the country’s economic slowdown.

Investors are now anticipating more stimulus, particularly for China’s struggling property sector, after the central bank reduced its 14-day lending rate.

Oil Prices and Middle East Tensions

Oil prices inched up as Hezbollah’s actions in Lebanon, followed by retaliatory Israeli strikes, heightened fears of further conflict escalation in the Middle East. Brent crude increased by 0.2% to $74.60 per barrel, and West Texas Intermediate rose 0.1% to $71.10 per barrel.

Currency and Commodity Movements

The Japanese yen strengthened slightly against the dollar after the Bank of Japan’s decision to hold off on additional interest rate hikes. Gold prices hovered around record highs, driven by the Fed’s rate cut and geopolitical tensions, making it an attractive option for traders.

Key Figures (as of 0810 GMT)

– Hong Kong: Hang Seng Index down 0.1% at 18,247.11

– Shanghai: Composite rose 0.4% at 2,748.92

– London: FTSE 100 up 0.4% at 8,259.88

– Oil Prices: Brent crude up 0.2% at $74.60 per barrel, WTI rose 0.1% to $71.10 per barrel

– Dollar/Yen: Down at 143.70 yen from 144.02 yen

– Gold: Around $2,650 per ounce