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Asia stocks slip, gold firm as Middle East conflict grips markets

Asian shares fell and gold rates increased on Monday as threat sentiment took a struck after Iran's retaliatory attack on Israel stoked worries of a wider regional dispute and kept traders on edge.

The dollar scaled a fresh 34-year high against the yen on growing expectations that sticky inflationary pressures in the United States will keep rates there greater for longer.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7% after Iran introduced explosive drones and rockets at Israel late on Saturday, in retaliation for a. suspected Israeli attack on its consulate in Syria on April 1.

The hazard of open warfare emerging between the arch Middle. East enemies and dragging in the United States has left the area. on tenterhooks. U.S. President Joe Biden cautioned Prime Minister. Benjamin Netanyahu the U.S. will not take part in a. counter-offensive against Iran.

Israel said the project is not over yet.

A sense of uneasiness swept over markets in Asia on Monday. in the middle of the escalating geopolitical tensions, with Japan's Nikkei. sliding 1%, while Australia's S&P/ ASX 200 index. lost nearly 0.5%.

Hong Kong's Hang Seng Index was down 0.63%.

The flight to security sent gold up more than 0.5% to. $ 2,356.39 an ounce and kept the dollar firm.

Oil prices, nevertheless, hardly reacted to the news, as. traders had mostly priced in a vindictive attack from Iran. that would likely further interfere with supply chains. That saw Brent. unrefined futures peaking at $92.18 a barrel last week, the. greatest level given that October.

Brent was last 0.24% lower at $90.23 per barrel, while. U.S. West Texas Intermediate crude futures fell 0.35% to. $ 85.36 a barrel.

The crucial dangers for the global economy are whether this now. escalates into a broader regional conflict, and what the. response is in energy markets, said Neil Shearing, group chief. economist at Capital Economics.

An increase in oil rates would complicate efforts to bring. inflation back to target in innovative economies, but will only. have a product impact on reserve bank decisions if greater. energy rates bleed into core inflation.

U.S. stock futures ticked higher, after a heavy selloff. on Wall Street on Friday as arise from significant U.S. banks stopped working. to impress.

S&P 500 futures and Nasdaq futures each rose. about 0.4%.

EUROSTOXX 50 futures tacked on 0.22%, while FTSE. futures moved 0.5%.

China, nevertheless, was an outlier, with stocks pressing greater. after the nation's securities regulator issued draft guidelines on. Friday to reinforce the supervision of company listings,. delistings and computer-driven program trading.

Market participants took the move as a favorable signal to. improve China's ailing stock market and protect investors'. interests.

The country's blue-chip CSI300 index rose nearly. 2%, while the Shanghai Composite index acquired 1.2%.

RATE RETHINK

Somewhere Else, U.S. Treasury yields held near their recent highs. as traders pared back their expectations of the pace and scale. of rate cuts from the Federal Reserve this year.

The benchmark 10-year yield last stood at. 4.5605%, while the two-year yield held near the 5%. level and was last at 4.9269%.

An ongoing run of resilient U.S. financial information,. particularly recently's hotter-than-expected inflation report,. has added to the view that U.S. rates could remain greater for. longer, and that a Fed alleviating cycle is not likely to commence in. June.

Futures now point to about 44 basis points worth of reducing. expected this year, a huge pullback from the 160 bps that was. priced in at the start of the year.

That total change in the rate outlook has in turn sent the. dollar on a tear, pushing it to a 34-year peak of 153.85 yen on. Monday.

The euro and sterling were similarly. pinned near five-month lows.

We have actually updated our projections for the U.S. FOMC, pushing. out the timing of the start of the rates of interest cutting cycle. to September 2024, from July previously, said Kristina Clifton,. a senior economist at Commonwealth Bank of Australia.

The U.S. CPI has been more powerful than expected over the. 3 months of 2024. We anticipate that it will take a string of. inflation prints of 0.2%/ month or lower to provide the Fed. self-confidence that inflation can remain sustainably lower and that. interest rates do not need to remain at a restrictive level.

A multitude of Fed policymakers are because of speak this week,. consisting of Chair Jerome Powell, who could give additional clarity on. the future path of U.S. interest rates.

The shift in rate expectations has halted bitcoin's. blistering rally, after the world's biggest. cryptocurrency repeatedly notched fresh records this year thanks. to flows into new spot bitcoin exchange-traded funds and. expectations of imminent Fed cuts.

Bitcoin fell more than 3% to $65,010, also weighed down in. part by the worldwide risk-off state of mind.

(source: Reuters)