Yemen weighs on Asian shares, Japan gains on stimulus hopes
Asian shares were lackluster Friday as investors monitored violence in the Middle East
Asian shares were lackluster Friday as investors monitored violence in the Middle East but Japan’s market rose after weak economic data boosted hopes for more central bank stimulus.
Japan’s Nikkei 225 rose 0.5 percent to 19,564.67 after slipping in and out of negative territory early in the session. South Korea’s Kospi was down 0.1 percent at 2,022.56 and Hong Kong’s Hang Seng fell 0.2 percent to 24,446.75. Australia’s S&P/ASX 200 rose 0.6 percent to 5,917.30. Taiwan’s benchmark fell and markets in Southeast Asia were flat.
Lackluster inflation, wages and household spending data for February are adding to expectations that the central bank may resort to further monetary stimulus to spur growth. Core inflation excluding volatile food prices was 2.0 percent in February, down from 2.2 percent in January. Excluding the impact of an April 2014 sales tax hike, inflation was flat, suggesting the world’s No. 3 economy remains in the doldrums.
The turmoil in Yemen has erupted into a regional conflict, with Saudi Arabia and its allies bombing Shiite rebels allied with Iran, while Egyptian officials said a ground assault will follow the airstrikes. Iran denounced the Saudi-led air campaign, saying it “considers this action a dangerous step.” The military action has turned impoverished and chaotic Yemen into a new front in the rivalry between Saudi Arabia and Iran.
“All eyes turn to the Middle East as conflict in Yemen stands as a stark reminder of the one-sided nature of the geo-political risks to asset markets,” said Michael McCarthy, chief strategist at CMC Markets in Sydney. “Higher oil and gold prices, and lower share markets, are the inevitable result of the return of risk as the potential for armed conflict escalates,” he said in a market commentary.
Oil prices dropped after two days of sharp gains triggered by the conflict in Yemen, which raised concerns that supplies of crude from the Persian Gulf region could be disrupted. Benchmark U.S. crude slipped 87 cents to $50.56 a barrel in electronic trading on the New York Mercantile Exchange. The futures contract gained $2.22, or 4.5 percent, to close at $51.43 a barrel on Thursday. Brent crude, a benchmark for international oils, was down 98 cents at $50.56 a barrel in London.
Conflict in the Middle East and the rapid ascent of the U.S. dollar are causing companies to pull back their profit forecasts, putting investors on edge and taking shares lower after they hit record highs earlier in the month. The Dow Jones industrial average lost 40.31 points, or 0.2 percent, to 17,678.23, while the Standard & Poor’s 500 index lost 4.90 points, or 0.2 percent, to 2,056.15.
The U.S. currency has appreciated 8 percent in the past three months, a trend that tends to make U.S.-made goods more expensive abroad. On Friday, the euro was little changed at $1.0822 from $1.0880 in the previous session. The dollar rose to 119.28 yen from 119.19 yen.